Please note this is only an opinion and not financial advice. Direct stock investing is subject to business and market risks. Therefore, it’s highly recommended to do proper risk management and your own due diligence before investing.
Growth Stock Analysis as of 05 November 2023
Top Growth Stock
NYSE: T. Rowe Price Group, Inc. (TROW)
- * TROW is a prominent asset management company overseeing approximately $1.4 trillion in assets under management (AUM). It holds the 16th position among the world’s largest asset management firms.
- * TROW offers a range of investment strategies, including equities, fixed income, multi-asset, and alternative investments. Notably, equities constitute the most substantial portion of TROW’s business, representing approximately 52% of the total assets under management.
- *TROW manages assets for both individuals and institutions with the institutional business slightly larger accounting for ~55% of AUM.
- * Over the last two decades, TROW has provided investors with a total return of 706%, surpassing the S&P 500’s 497% and the financial sector at 126%.
- * Although facing net outflows, TROW maintains a positive outlook for its long-term prospects.
- * T. Rowe Price Group is a core holding for long-term income-oriented equity investors, with a strong track record of long-term results.
What we think are pros of business:
- TROW has a very friendly capital allocation policy and has returned nearly $6 billion in capital to shareholders over the past 2 years alone in the form of dividends and share buybacks.
- The company also earns administrative fees by offering an extensive range of services to its investment advisory clients. These fees increase with the greater volume of assets managed or administered.
- TROW recently launched exchange-traded funds (ETFs) in response to increased demand from clients seeking additional investment options.
- Overall expenses have increased by over 8% annually over the past five years, which is well above the rate of revenue growth.
- The company’s management emphasized the importance of attaining significant cost efficiencies while simultaneously balancing expense management with the execution of strategic objectives.
What we think the risks are:
- The company’s revenues dropped off due to lower management fees and the stock dropped off because stocks were selling off.
- TROW is potentially decaying in its long-term product performance track record.Â
- The intense competition in the asset management sector raises concerns about TROW’s capability to both preserve and grow its assets under management (AUM) and market presence.
- Funds outflow may accelerate if the macroeconomic situation gets worse.Â
Fundamentals:
- Market Cap: 21.38 Billion
- Revenue: 6.34 Billion
- Dividend: $4.88 (5.10%)
- EPS: 7.35
- PE: 13.01
Technical for a long-term perspective:
– Taking support at the lower rectangular support line which is the support zone from the last 4 years.
– There is a pattern like bullish engulfing which shows the strength of the stock for upside momentum.
– It may try to hit its EMA levels as a resistance zone around 110 levels.
- – The current level is a trend reversal level. So, there is a high probability of bullish momentum from this level.
– RSI is very bullish at current levels and recovering from the oversold zone and heading towards upper levels.
– Don’t trade if the next week’s candle is red. Wait to cross the last week’s high for big and speedy momentum.
Entry = 95
Stop Loss = 84
Target = 124 / 148 / 187
Our Final Thought:
TROW has a strong historical performance record and trades at a low valuation of 12.1x earnings, with a 5% yield. Despite recent challenges, it stands out among active asset managers. While facing competition from passive funds, its historical track record makes it appealing, both as an investment and a potential acquisition target. This company is good for now and great business but any macroeconomics can affect it heavily. Given historical PE ratios and dividend yields, the company appears reasonably valued and attractive, respectively. I think the long-term prospects look good, and with a decent dividend yield, there’s no need to worry during macroeconomic uncertainty. Eventually, things will improve, and I expect TROW to be much higher in five years.
Please note this is only an opinion and not financial advice. Direct stock investing is subject to business and market risks. Therefore, it’s highly recommended to do proper risk management and your own due diligence before investing.
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