With record equity assets of $84.1 billion and 5.4% year-over-year growth in earnings per share in the third quarter, Federated Investors, Inc. FII can be a solid bet now. The company’s diversified asset and product mix, along with the continued acquisition of money market assets amid volatile markets, is anticipated to yield upbeat results.
Though compliance-related fees continue to escalate for Federated, given the strictly regulated nature of investment management business, sharper focus on restructuring the product line and merging certain funds may make the growth path smoother.
With $437.2 billion in managed assets as of Sep 30, 2018, Federated is one such stock which not only beat estimates in the Sep-end quarter, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 3.3% and 0.4%, respectively.
Additionally, shares of this Zacks Rank #2 (Buy) company have gained 4.5% in the past six months as against the 23.5% decline recorded by the industry.
Notably, Federated has a number of other aspects that make it an attractive investment option.
5 Reasons Why Federated is a Must Buy
Earnings Strength: Federated witnessed historical earnings per share (three-five years) growth of 12.65%. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 5.93% promises rewards for investors over the long run. Also, it recorded an average positive earnings surprise of 1.24% over the trailing four quarters.
Strategic Deals: Under the prevailing pressure for money-market funds, acquiring money market assets depicts buoyancy of the company in the money-market business. Over the past three years, Federated has acquired more than $9 billion of money-market assets. Furthermore, in the last few years, the company has inked strategic deals, and thereby, expanded operations in the U.K. and Chile. Notably, the company continues to seek alliances and acquisitions to expand its business in Europe and the Asia-Pacific region, as well as the United States and rest of the Americas.
Strong Leverage: Federated’s debt/equity ratio is 0.19 compared to the S&P 500’s average of 0.65, indicating relative lower debt burden. It highlights the financial stability of the company even in an unstable economic environment.
Superior Return on Equity (ROE): Federated’s ROE of 30.19%, as compared with the industry average of 13.88%, reflects the company’s commendable position over its peers.
Stock Looks Undervalued: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks to Consider
Greenhill & Co., Inc. GHL has been witnessing upward estimate revisions for the past 60 days. Moreover, this Zacks #1 Ranked (Strong Buy) stock has rallied more than 29% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
BancFirst Corporation BANF has been witnessing upward estimate revisions for the past 60 days. Further, the company’s shares have gained 2.4% year to date. At present, it carries a Zacks Rank of 2.
First Financial Bankshares, Inc. FFIN has been witnessing upward estimate revisions for the past 60 days. Additionally, the stock has jumped around 34% year to date. It currently carries a Zacks Rank #2.
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