On Tuesday, BMO Capital adjusted its outlook on Invesco (NYSE:IVZ), reducing the firm's price target on the stock to $17 from the previous $18 while retaining a Market Perform stock rating. The revision reflects a more conservative view on the company's growth prospects and anticipates a slower pace of margin improvement.
The analyst from BMO Capital provided a breakdown of the valuation, noting that "Shareholders should derive 60% of value from active public markets (11x multiple), 18% from passive (14x multiple), and 22% from private alternatives (15x multiple)."
The new price target is based on an estimated 12.2x forward U.S. GAAP earnings multiple, suggesting that the market's expectations for Invesco's earnings have been moderated. This adjustment takes into account the current market conditions, which have led to the analyst's projections of low-single-digit organic AUM (assets under management) growth for Invesco.
Invesco's stock valuation, according to BMO Capital's analysis, is divided among its various business segments. The largest share of the company's value, 60%, is attributed to its active public markets segment, which is expected to trade at an 11x earnings multiple.
Meanwhile, the passive segment, representing 18% of value, is assigned a higher 14x multiple. The private alternatives segment, accounting for 22% of the valuation, is given the highest multiple at 15x.
The Market Perform stock rating suggests that BMO Capital views Invesco's stock as likely to perform in line with the broader market or sector averages. This rating is maintained despite the lowered price target, indicating that the firm does not see significant underperformance or outperformance in the near term relative to the market.
In summary, the updated analysis by BMO Capital reflects a cautious stance on Invesco's growth potential and profitability outlook. The firm has factored in the impacts of market dynamics on Invesco's business, leading to the revised stock price target of $17. Shareholders and potential investors now have a new benchmark to consider when assessing the company's stock performance moving forward.
InvestingPro Insights
As Invesco (NYSE:IVZ) navigates through the challenges presented by market dynamics, recent data from InvestingPro sheds light on the company's financial health and future prospects. With a market capitalization of $6.66 billion, the company shows a notable adjusted P/E ratio of 3.96 for the last twelve months as of Q4 2023, which suggests a potential undervaluation when compared to the industry average.
Moreover, the dividend yield stands at an attractive 5.13%, which is particularly compelling for income-focused investors, especially considering Invesco's track record of maintaining dividend payments for 18 consecutive years.
InvestingPro Tips highlight that analysts are expecting an increase in net income this year for Invesco. This aligns with the positive sentiment of 9 analysts who have revised their earnings upwards for the upcoming period.
Still, it is important to note that analysts also anticipate a sales decline in the current year. This mixed outlook is reflected in the company's recent price performance, with a significant 28% uptick over the last six months, yet a year-to-date price total return of -11.52%.
For investors seeking a more in-depth analysis, InvestingPro offers additional tips on Invesco, which can be accessed through their platform. By using the coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights that can guide investment decisions. With 6 more InvestingPro Tips available, investors can gain a comprehensive understanding of Invesco's financials and market position.
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