Envestnet, Inc. ENV remains poised for growth, backed by strong recurring revenue generation capacity and efforts to improve operational efficiency and market competitiveness.
The company has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.
Envestnet’s long-term earnings growth is pegged at 17.5%, higher than the industry average of 12.5%. Earnings for 2019 and 2020 are expected to grow 10.4% and 19.1%, respectively.
Factors Aiding the Stock
Envestnet’s business model ensures solid asset-based and subscription-based recurring revenue generation capacity. Recurring revenues in the second quarter of 2019 came in at $212.3 million, up 11.8% year over year and constituting 95% of total revenues.
Envestnet, Inc Revenue (TTM)
Envestnet, Inc revenue-ttm | Envestnet, Inc Quote
The company continues to focus on technology development with a view to improve operational efficiency, increase market competitiveness, address regulatory demands and cater to client-driven requests for new capabilities. Its technology design allows for significant scalability.
A number of trends are creating significant market opportunity for Envestnet’s technology- enabled solutions and services. Investment advice is becoming an important part of financial planning and customers are increasingly seeking personalized wealth management services. Technology adoption is likely to increase significantly with increasing need to interact with clients who prefer guided advice in a cost-effective manner.
Further, according to various media sources, a massive wealth transfer will happen in the coming years as baby boomers transfer assets to their offspring, who tend to prefer greater use of technology in their involvements with advisors.
Envestnet never declared and currently does not have any plan to payout cash dividends on common stock. So, investors seeking cash dividends should avoid buying Envestnet’s shares.
With goodwill constituting more than 50% of its total assets, Envestnet’s capital structure puts investors at risk, thereby weighing on the stock that has declined 16.1% in the past six months. This is because such a large percentage of assets won’t actually fetch any cash if there is any problem with the company.
Zacks Rank & Stocks to Consider
Envestnet currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are CoreLogic CLGX, S&P Global SPGI and Paychex PAYX. While CoreLogic sports a Zacks Rank #1 (Strong Buy), S&P Global and Paychex carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings (three to five years) growth rate for CoreLogic, S&P Global and Paychex is estimated 11%, 10% and 9%, respectively.
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