Invesco: An Undervalued Financial

12/23/2016 10:00 am EST


Crista Huff

Editor, Cabot Undervalued Stocks Advisor

We’ve all heard the news that financial stocks are going to benefit from potential changes in politics and the economy; changes that include rising interest rates, falling income tax rates and potential job growth, asserts Crista Huff, editor of Cabot Undervalued Stocks Advisor.

And sure enough, money-center and regional bank stocks soared since the election. But not all financials have participated in the market run-up, and one undervalued financial stock in particular is ripe for a breakout.

I think Invesco (IVZ) is a particularly undervalued financial stock, an asset management company that’s based in Georgia, with offices in North America, Europe, the Middle East and Asia.

Invesco has $805.6 billion assets under management, almost evenly split between equity investments (48%), and fixed income and other investments (52%).

Let’s look at a few key fundamental numbers. Wall Street expects Invesco to earn $2.24 per share in 2016, $2.57 in 2017 and about $3.00 in 2018.

That represents earnings growth of 14.7% in 2017 — a very respectable growth rate.

As for the price/earnings ratio, it’s not often that investors see a P/E range as predictable as IVZ’s. In the years 2012 through 2015, the P/E ranged consistently between 13 and 19, then dipped a bit lower in 2016. 

The 2017 P/E is 12.3, meaning it’s not only an undervalued vs. the earnings growth rate, it’s also sitting at the bottom of its P/E range.

Invesco tends to modestly increase its dividend annually at its late-April dividend declaration. The current quarterly payout is $0.28 per share, giving the stock a current yield of 3.5%.

Invesco is an undervalued financial stock that hasn’t yet participated in the market’s run-up, yet has attractive EPS growth, a low P/E and a big dividend. I recommend that you buy now.

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