Shares of Legg Mason LM have surged nearly 50.7% year to date as against the industry’s decline of approximately 0.6%. Strong fundamentals driven by steady revenue growth as well as inorganic expansion strategy seem to be the primary reasons for this impressive stock performance.
Further, this Zacks Rank #3 (Hold) stock has been witnessing solid estimate revisions. Over the last 60 days, the Zacks Consensus Estimate for fiscal 2020 (ended Mar 31) and fiscal 2021 increased 2% to $3.60 and 2.9% to $3.95, respectively.
Moreover, the stock has an impressive earnings surprise history. Legg Mason has surpassed estimates three of the four trailing quarters, with the average beat being 9.91%.
While past performance does not guarantee a similar trend in the future, we believe the following factors are enough to support a steady price rise for Legg Mason going ahead.
Strategic Acquisitions: Legg Mason has expanded primarily via acquisitions. These acquisitions significantly diversified its product offerings, contributed significantly to its assets under management (AUM) and expanded the company’s market share globally. These investments were in line with the company’s long-term strategy, which focused on providing investors with choices across investment capability, product and vehicle, and distribution.
AUM Growth: Due to unfavorable market conditions over the last few years, Legg Mason reported net outflows. Despite these outflows, the company’s AUM witnessed a three-year (ended fiscal 2019) CAGR of 2%, with the trend continuing in first-quarter fiscal 2020. Legg Mason’s acquisitions should continue to serve as a catalyst for AUM growth, and support top-line growth.
Strong Leverage: Legg Mason’s debt/equity ratio is 0.61 compared with the S&P 500 average of 0.72, reflecting relatively low debt burden. This highlights the financial stability of the company even in an unstable economic environment.
Stock Looks Undervalued: The stock seems undervalued when compared with the broader industry. Its current price-to-book and price-to-earnings ratios of 0.90 and 10.68 are lower than the respective industry averages of 1.49 and 11.60.
Stocks to Consider
Invesco Ltd. IVZ has been witnessing upward estimate revisions over the past 60 days. Moreover, this Zacks #2 Ranked (Buy) stock has returned 0.7%, year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Artisan Partners Asset Management Inc. APAM has been witnessing upward estimate revisions over the past 60 days. Also, the company’s shares have gained nearly 29.2% year to date. At present, it carries a Zacks Rank of 2.
Ameriprise Financial, Inc. AMP has been witnessing upward estimate revisions over the past 60 days. Additionally, the stock has jumped around 40% year to date. It currently carries a Zacks Rank #2.
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Artisan Partners Asset Management Inc. (APAM) : Free Stock Analysis Report
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