With record equity assets of $80.8 billion and 22% year-over-year growth in earnings per share in the third quarter, Federated Investors, Inc. FII can be a solid bet now. The company’s diversified asset and product mix, along with the continued acquisition of money-market assets amid volatile markets, is anticipated to yield upbeat results in the upcoming period.
Though Federated’s compliance-related fees continue to escalate, given the strictly regulated nature of investment management business, sharper focus on restructuring the product line and merging certain funds may make its growth path smoother.
With $527.2 billion in managed assets as of Sep 30, 2019, Federated is one such stock which not only trumped estimates during the September-end quarter, but has also been witnessing upward estimate revisions. This suggests analysts’ optimism about the company’s future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2019 and 2020 moved up 3.2% and around 1%, respectively.
Additionally, shares of this Zacks Rank #2 (Buy) company have gained 5.5% in the past six months as against the 5.3% decline recorded by the industry.
Notably, Federated has a number of other aspects that make it an attractive investment option.
6 Reasons Why Federated is an Attractive Pick
Earnings Strength: Federated witnessed historical earnings per share (three-five years) growth of 12.8%. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 8.23% promises rewards for investors over the long run. Also, it recorded an average positive earnings surprise of 2.21% over the trailing four quarters.
Revenue Strength: Federated continues to witness top-line improvement. In 2018, the company’s sales recorded five-year compound annual growth rate (CAGR) of nearly 7.2%, with some annual volatility.
The company’s projected sales growth (F1/F0) of 15.94% (against the industry average of nil) indicates constant upward momentum in revenues.
Strategic Deals: Under the prevailing pressure for money-market funds, acquisition of money-market assets displays the company’s buoyancy in the money-market business. Increased money-market AUM will furnish the company with various new fund offerings, in turn benefiting its clients. Notably, the company continues to seek alliances and acquisitions to expand its business in Europe and the Asia-Pacific region as well as in the United States and rest of the Americas.
Strong Leverage: Federated’s debt/equity ratio is 0.24 compared with the industry average of 0.33, indicating relative lower debt burden. It highlights the company’s financial stability even in an unstable economic environment.
Superior Return on Equity (ROE): Federated’s ROE of 27.84%, as compared with the industry average of 12.66%, highlights the company’s commendable position over its peers.
Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Stocks to Consider
Cohen & Steers Inc CNS has been witnessing upward estimate revisions for the past 30 days. Moreover, this Zacks #1 Ranked stock has rallied more than 15.9% year over the last six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
First Defiance Financial Corp. FDEF has been witnessing upward estimate revisions for the past 30 days. Further, the company’s shares have gained 4.5% over the last six months. At present, it flaunts a Zacks Rank of 1.
Investors Bancorp, Inc. ISBC has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped around 9.1% in six months’ time. It currently carries a Zacks Rank #2.
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Federated Investors, Inc. (FII) : Free Stock Analysis Report
Cohen & Steers Inc (CNS) : Free Stock Analysis Report
First Defiance Financial Corp. (FDEF) : Free Stock Analysis Report
Investors Bancorp, Inc. (ISBC) : Free Stock Analysis Report
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