Solid Asset Balance Aids Eaton Vance (EV) Despite High Costs
Eaton Vance Corp. EV remains well-poised for revenue growth, supported by a solid assets under management (AUM) balance, and diverse product offerings. Moreover, its global footprint is expected to keep supporting growth in the long term.
However, continuously increasing expenses mainly due to higher compensation costs are expected to hurt the company’s bottom line to an extent in the near term.
In fact, the Zacks Consensus Estimate for its current fiscal-year earnings has been unchanged over the past seven days. Thus, the stock currently carries a Zacks Rank #3 (Hold).
Moreover, the company’s price performance does not seem encouraging. Shares of Eaton Vance have lost 20.2% so far this year compared with a decline of 8.2% recorded by the industry.
Looking at fundamentals, the company’s revenues (on a GAAP basis) witnessed a CAGR of 7.8% over the last four fiscal years (2016-2019), mainly driven by solid AUM balance. The uptrend in revenues continued in the first six months of fiscal 2020. The company’s diverse product offerings and investment strategies are expected to continue to attract investors, which along with robust AUM balance will likely keep supporting revenue growth.
While the company’s AUM declined in the first six months of fiscal 2020 mainly due to net outflows as a result of the virus outbreak-induced uncertainties, the same witnessed a CAGR of 13.9% over the last four fiscal years (2016-2019).
Further, Eaton Vance’s capital-deployment activities seem impressive. In October 2019, it announced a dividend hike for the 39th consecutive fiscal year. Also, the company has a share-repurchase plan in place. Given its decent earnings growth, it is expected to be able to sustain capital-deployment plans, thus enhancing shareholder value.
However, the company’s expenses have witnessed a CAGR of 5.4% over the past four fiscal years (2016-2019), with the uptrend continuing in the first six months of fiscal 2020. Rise in compensation costs as well as fund-related charges are expected to keep expenses high in the future as well.
Moreover, high debt levels could restrict Eaton Vance from procuring additional finance for working capital, capital expenditure, acquisitions, debt service requirements or other purposes. Notably, the company’s current liquidity position does not look sufficient to be able to meet debt obligations if economic situation worsens.
A few stocks from the finance space worth a look are mentioned below.
Merchants Bancorp’s MBIN current-year earnings estimates have moved 11.4% upward over the past 60 days. The stock has depreciated 8.6% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GAIN Capital Holdings’ GCAP current-year earnings estimates have moved up significantly over the past 60 days. Further, the company’s shares have gained 48.6% over the past six months. At present, it carries a Zacks Rank of 2.
West Bancorporation’s WTBA current-year earnings estimates have moved up 13.9% over the past 60 days. The company’s shares have declined 26.8% over the past six months. At present, it sports a Zacks Rank of 1.
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Eaton Vance Corporation (EV) : Free Stock Analysis Report
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