Here's Why Eaton Vance (EV) Stock is Worth Betting on Now
It seems to be a wise idea to add Eaton Vance Corp. EV stock to your portfolio now amid the coronavirus pandemic, considering the strength in its fundamentals and solid prospects. Moreover, its steady capital-deployment activities make the stock attractive for investors.
Further, analysts are bullish on the stock. In the past 30 days, the Zacks Consensus Estimate for earnings has moved 1.7% and 2.4% upward for fiscal 2020 and 2021, respectively. The company currently carries a Zacks Rank #2 (Buy).
Shares of Eaton Vance have gained 44.6% in the past 12 months compared with the industry's 16.5% rise.
Factors That Make Eaton Vance a Solid Pick
Earnings Growth: Over the past three to five years, Eaton Vance has recorded earnings growth of 14.3%, higher than the industry average of 6.6%. Moreover, fiscal 2020 and 2021 earnings are expected to rise 11.3% and 16.4%, respectively.
Also, the company has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of 5.4%.
Revenue Strength: Eaton Vance’s total net revenues have witnessed a compound annual growth rate (CAGR) of 6.7% over the last five fiscal years (2016-2020). The increase was mainly driven by improving AUM balance, which witnessed a CAGR of 6.9% over the last four fiscal years (2017-2020) despite coronavirus-induced uncertainty during the major part of fiscal 2020.
Moreover, Eaton Vance’s diverse product offerings and investment strategies will continue to attract investors, which along with the improving AUM balance, are likely to continue driving revenues.
Further, sales are expected to increase 7.3% in fiscal 2020 and 8.6% for fiscal 2021.
Steady Capital-Deployment Activities: The company is committed toward enhancing shareholders’ value. In October 2019, it announced a dividend hike for the 39th consecutive fiscal year. Moreover, as part of its merger deal with Morgan Stanley, the company announced a special dividend of $4.25 per share in November 2020.
Further, the company has a share-repurchase plan in place. In July 2019, it announced a new repurchase authorization of 8 million shares. As of Jul 31, 2020, nearly 4 million shares remained available under the buyback authorization.
Superior ROE: Eaton Vance’s trailing 12-month return on equity (“ROE”) highlights its growth potential. The company’s ROE of 29.84% compares favorably with the industry’s 11.30%, underlining that it is more efficient in using shareholder funds than its peers.
Strong Leverage: Currently, Eaton Vance has a debt/equity ratio of 0.50, below the industry average of 0.64. This shows that it is more financially stable compared to its peers even in adverse economic conditions.
Other Stocks to Consider
Federated Hermes, Inc. FHI has witnessed an upward earnings estimate revision of 2.8% for 2021 over the past 30 days. Its shares have lost 14.5% so far this year. At present, it sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Invesco Ltd. IVZ recorded a marginal upward earnings estimate revision for 2021 in the past 30 days. Its shares have depreciated 5.1% over the past year. It currently sports a Zacks Rank of 1.
T. Rowe Price Group, Inc. TROW has witnessed 4.8% upward earnings estimate revision for 2021 in the past 30 days. Its shares have appreciated 21.8% over the past year. It currently carries a Zacks Rank of 2.
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