The entire finance sector lagged behind in the first-quarter 2016 earnings season, which mirrored the significant economic volatility witnessed during the period. Slowdown in China’s economy, a stressed energy sector, uncertainty over the timing of the Fed rate hike and several other macroeconomic factors dominated the scene.
Investment management (part of the broader Finance sector) performed poorly too, as investors turned risk averse, leading to significant outflows across the industry. Also, assets under management for many investment managers did not witness any improvement in the three months ended Mar 31, 2016.
However, with stabilization in commodity prices and U.S. dollar as well as consistent focus of central banks on their commitment to stimulate growth and inflation, the current picture looks a little better. Also, improvement in the U.S. economic data has set a good pace for the quarters ahead.
With declining volatility and change in investors’ sentiments, SEI Investments Co. SEIC with its strong fundamentals and good growth potential looks like a good investment bet. The company’s diversified product and revenue mix, strong global presence, enhanced capital deployment and robust asset inflows make it an attractive pick.
5 Reasons to Own the Stock Now
Revenue Strength: SEI Investments has been witnessing consistent improvement in revenues for the past few years. Over the last 6 years (2010–2015), the company’s revenues recorded a CAGR of 8.2%. The company’s projected sales growth (F1/F0) of 4.72% ensures continuation of the upward trend in revenues.
Earnings Per Share Growth: SEI Investments witnessed earnings per share CAGR of 15.3% over the last 5 years (2011–2015), justifying the two-fold increase in share price in those five years.
The earnings momentum is expected to continue in the near term as reflected by the company’s projected EPS growth (F1/F0) of 4.10% compared with the industry average rate of 0.18%. Also, the company’s long-term (3-5 years) estimated EPS growth rate of 13.5% promises rewards for investors.
Robust Asset Base: Asset inflows at SEI Investments remain robust. The company registered a rising trend in its total assets under management and administration over the last 5 years at a CAGR of 13.5% (2011–2015). Though the overall equity market remains volatile, this investment manager is well positioned to benefit from the same.
Steady Capital Deployment: SEI Investments continues to impress with its enhanced capital deployment activities. In Apr 2016, the company increased its share buyback authorization by an additional $200 million. Further, in Dec 2015, the company hiked its semi-annual dividend by 8% to $0.26 per share. Driven by its strong balance sheet position, the company is expected to continue deploying capital meaningfully.
Estimate Revisions: The Zacks Consensus Estimate for SEI Investments rose 5.2% to $2.03 per share for 2016 and 4.2% to $2.48 per share for 2017, over the past 30 days. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #1 (Strong Buy) for the stock.
Other Stocks to Consider
Some other finance stocks worth considering include Western Alliance Bancorporation WAL, Raymond James Financial, Inc. RJF and LPL Financial Holdings Inc. LPLA. These stocks also sport a Zacks Rank #1.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
WESTERN ALLIANC (WAL): Free Stock Analysis Report
RAYMOND JAS FIN (RJF): Free Stock Analysis Report
LPL FINL HLDGS (LPLA): Free Stock Analysis Report
SEI INVESTMENTS (SEIC): Free Stock Analysis Report
To read this article on Zacks.com click here.