Invesco (IVZ) is an investment management firm serving retail, institutional, and wealth management customers. It has more than 7,000 employees, oversees $970 billion in assets under management (AUM), and serves clients in more than 150 countries, observes Ben Reynolds, editor of Sure Retirement.
Invesco is pursuing growth through acquisitions. In early April, Invesco completed (4/6/18) the acquisition of Guggenheim Investments’ ETF business for $1.2 billion.
This acquisition will enhance Invesco’s product offerings in exchange-traded funds. Separately, Invesco acquired (6/6/18) Intelliflo, a technology platform for advisors. Intelliflo supports approximately 30% of U.K. financial advisors.
Invesco announced (10/4/18) the launch of its new BulletShares ETFs with specific exposure to emerging markets debt. The four ETFs within the suite are 2021, 2022, 2023, and 2024 dated, and expand the BulletShares family to include 22 ETFs with maturities from 2018 to 2028.
Invesco is among the safer recommendations in this newsletter. The company has credit ratings of A2 and A from Moody’s and Standard & Poor’s, respectively. Invesco has generated nine consecutive years of positive long-term net inflows.
In addition, Invesco should have a payout ratio below 50% in 2018, which allows room for dividend increases each year even if earnings growth stalls temporarily.
We continue to expect Invesco to generate earnings-per-share of $2.90 in 2018. Based on this, Invesco stock trades for a price-to-earnings ratio of 7.2. We believe a fair valuation for Invesco is a price-to earnings ratio of 14.
As a result, our fair value price estimate for Invesco shares is approximately $41. Compared with a current share price of $20; the stock is significantly undervalued. Over the next five years, a rising valuation could add almost 14% to total returns.
In addition, we believe Invesco can reasonably generate annual earnings growth of 6%. Total returns could exceed 25% per year, based on the combination of a rising valuation, earnings growth, and the current 6.0% dividend yield.
