Shares of T. Rowe Price Group, Inc. TROW appreciated nearly 16% year to date as compared with the industry’s growth of approximately 18.8%. Robust fundamentals, driven by steady revenue growth, as well as low debt level and strong capital deployment activities seem to be the primary reasons for this impressive stock performance.
Further, this Zacks #2 (Buy) Ranked stock has been witnessing solid estimate revisions. Over the last 60 days, the Zacks Consensus Estimate for 2019 inched up 1.3% to $7.52 and 1.4% to $7.75 for 2020.
Additionally, the stock currently has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Moreover, the stock has a decent earnings surprise history. T. Rowe Price surpassed estimates, in two of the four trailing quarters, the average beat being 3.9%.
While past performance doesn’t guarantee similar trend in the future, we believe the following factors are enough to support a steady price rally for T. Rowe Price:
Revenue Growth: Organic growth remains a key strength at T. Rowe Price, as reflected in its revenue growth story. Net revenues have witnessed a 7.8% CAGR, over the last five years (2014-2018). The company’s projected sales growth (F1/F0) of 3.7% indicates constant upward momentum in revenues.
Earnings Per Share Strength: T. Rowe Price witnessed earnings growth of 11.3%, over the last three-five years. In addition, the company’s long-term (three-five years) estimated EPS growth rate of 9.02% promises rewards for investors over the long run. Also, earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 3.42% compared to the industry average rate of 1.65%.
Steady Capital Deployment: In February 2019, the company raised its quarterly common stock dividend by 8.6%. This marked T. Rowe Price’s 33rd consecutive annual dividend increase and reflected its commitment to return value to shareholders with strong cash-generation capabilities. Further, its board of directors increased the common share-repurchase authorization by 10 million shares, bringing the total authorization to about 22.4 million shares.
Strong Leverage: T. Rowe Price’s debt/equity ratio is 0.03 compared with the industry average of 0.44, displaying significantly low debt burden relative to the industry. It highlights the financial stability of the company even in an unstable economic environment.
Superior Return on Equity (ROE): T. Rowe Price’s ROE of 28.93%, compared with the industry average of 13.4%, indicates the company’s commendable position over its peers.
Other Key Picks
First Business Financial Services, Inc. FBIZ has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock jumped more than 21% in the past six months. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
BankUnited, Inc. BKU has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 15.9% over the past six months. It holds a Zacks Rank #2, at present.
Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 60 days. Over the past six months, the company’s share price has been up more than 7%. It carries a Zacks Rank #2, currently.
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