With record period-end fixed income assets of $41.6 billion as of Sep 30, 2015, which crossed $25 billion in assets under management (AUM) for the first time in its 40-year history in 2012; Janus Capital Group, Inc. JNS appears a solid bet now. The company’s diversified product mix and continued strategic acquisitions are expected to yield positive results for the stock.
Though legal expenses might escalate for Janus Capital, given the strictly regulated nature of investment management business, sharper focus on organic growth is expected to make the growth path smoother for the company.
With $185 billion in managed assets as of Sep 30, 2015, Janus Capital’s strengths include strong top-line and earnings growth, strategic deals and steady capital deployment activities.
6 Reasons Why Janus Capital is a Must Buy
Revenue Growth: Janus Capital has witnessed revenue growth at a compounded annual growth rate (CAGR) of 6% (2012-2014). Further, this has helped substantially reduce the overall net outflows, from $19.7 billion in 2013 to $4.9 billion in 2014.
Janus Capital is trying to use a diversification strategy with new product innovation to improve investment performance with the help of a multi-boutique approach in order to provide style-specific expertise across an array of its strategies.
The company’s projected sales growth (F1/F0) of 13.3% (as against the industry average of about 0.00%) indicates continued upward momentum in revenues.
Earnings per Share Strength: Janus Capital’s earnings per share have recorded a CAGR of 21.4% over the last three years (2012–2014).
Earnings are expected to exhibit an upswing in the near term as the company’s projected EPS growth (F1/F0) is 11.73% compared to the industry average rate of negative 2.72%. To add to this, the company has recorded an average positive earnings surprise of 5.25% over the trailing four quarters.
Strategic Acquisitions: Janus Capital has been expanding its business through strategic investments over the past couple of years. In July 2015, the company completed the acquisition of 51% stake in Australia-based global unconstrained fixed income asset manager, Kapstream Capital Pty Limited, thereby strengthening its fixed income assets. Prior to that, the company acquired VS Holdings Inc. in December 2014 to tap opportunities in the growing exchange-traded funds (ETF) market.
Strong Leverage: Janus Capital’s debt/equity ratio stands at 0.18 compared to the industry average of 0.32, indicating relative lower debt burden. It indicates the financial stability of the company even in an unstable economic environment.
Favorable Zacks Rank: Janus Capital currently carries a Zacks Rank #2 (Buy). The bullish rank is driven by upward earnings estimate revisions over the last 30 days. For 2015, the Zacks Consensus Estimate remained stable at 90 cents, while for 2016, it increased 1% to $1.05 per share.
Steady Capital Deployment: Janus Capital remains focused on managing capital levels efficiently. In April 2015, the company’s board of directors increased its regular quarterly cash dividend by 13%. Also, the company has an active share buyback program in place. Such capital deployment activities are anticipated to boost investors’ confidence.
The Bottom Line
Organic growth, strategic acquisitions, strong capital position and steady capital deployment activities continue to support Janus Capital’s growth prospects. Also, a robust diversification strategy and growing fixed-income assets serve as key strengths that support earnings stability.
Other Stocks to Consider
Some other stocks worth considering in the banking space are Cohen & Steers Inc. CNS, Federated Investors, Inc. FII and Waddell & Reed Financial, Inc. WDR. All the three stocks carry the same Zacks Rank as Janus Capital.
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