T. Rowe (TROW) Soars to 52-Week High, Time to Cash Out?
Have you been paying attention to shares of T. Rowe Price Group (TROW)? Shares have been on the move with the stock up 6.4% over the past month. The stock hit a new 52-week high of $140.67 in the previous session. T. Rowe Price Group has gained 14.1% since the start of the year compared to the -14.3% move for the Zacks Finance sector and the 0.4% return for the Zacks Financial - Investment Management industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 29, 2020, T. Rowe reported EPS of $2.29 versus consensus estimate of $2.04.
For the current fiscal year, T. Rowe is expected to post earnings of $8.5 per share on $5.97 billion in revenues. This represents a 5.33% change in EPS on a 6.22% change in revenues. For the next fiscal year, the company is expected to earn $9.23 per share on $6.36 billion in revenues. This represents a year-over-year change of 8.59% and 6.61%, respectively.
Valuation Metrics
T. Rowe may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
T. Rowe has a Value Score of C. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 16.3X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 15X versus its peer group's average of 9X. Additionally, the stock has a PEG ratio of 2.09. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, T. Rowe currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if T. Rowe meets the list of requirements. Thus, it seems as though T. Rowe shares could have potential in the weeks and months to come.
How Does T. Rowe Stack Up to the Competition?
Shares of T. Rowe have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Janus Capital Group (JHG), AllianceBernstein Holding L.P. (AB), and Lazard (LAZ), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 25% of all the industries we have in our universe, so it looks like there are some nice tailwinds for T. Rowe, even beyond its own solid fundamental situation.
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