Manning & Napier Inc (NYSE:MN), a US$277.18M small-cap, operates in the capital markets industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Financial services analysts are forecasting for the entire industry, a strong double-digit growth of 12.05% in the upcoming year , and an optimistic near-term growth of 15.86% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, and also determine whether Manning & Napier is a laggard or leader relative to its financial sector peers. View our latest analysis for Manning & Napier
What’s the catalyst for Manning & Napier’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the previous year, the industry saw growth in the teens, beating the US market growth of 11.57%. Manning & Napier lags the pack with its negative growth rate of -60.33% over the past year, which indicates the company will be growing at a slower pace than its capital markets peers. As the company trails the rest of the industry in terms of growth, Manning & Napier may also be a cheaper stock relative to its peers.
Is Manning & Napier and the sector relatively cheap?
Capital markets companies are typically trading at a PE of 16.76x, in-line with the US stock market PE of 18.22x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 13.00% compared to the market’s 10.60%, potentially illustrative of past tailwinds. On the stock-level, Manning & Napier is trading at a PE ratio of 14.1x, which is relatively in-line with the average capital markets stock. In terms of returns, Manning & Napier generated 35.07% in the past year, which is 22.07% over the capital markets sector.
Manning & Napier has been a capital markets industry laggard in the past year. It delivered lower earnings growth compared to its peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the financial sector. However, before you make a decision on the stock, I suggest you look at Manning & Napier’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has MN’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Manning & Napier? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.