Shares of Eaton Vance Corp. EV have jumped 34.1% so far this year, outperforming the industry’s growth of 10.3%. The stock also surpassed the S&P 500 rally of 24% over the same time frame.
Revenue growth, driven by improving assets under management (AUM), and the company’s diverse product offerings and investment strategies, seem to be the primary reasons for this impressive stock performance.
However, the stellar performance marks a significant rebound, following a disappointing 2018. The company’s shares lost more than 35% in 2018, mainly owing to the tough operating backdrop in the fourth quarter.
Nevertheless, analysts have been bullish on the Zacks Rank #3 (Hold) stock of late. Over the past 30 days, the Zacks Consensus Estimate for Eaton Vance’s current fiscal-year earnings has moved 1.1% upward.
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While the company’s past performance doesn’t guarantee a similar trend in the future, we believe that the following factors are enough to support a steady price rally for Eaton Vance.
Earnings Strength: The company witnessed historical (last three-five years) earnings per share (EPS) growth of 8.3%, higher than the industry average of 5.8%. In addition, its EPS growth rate for fiscal 2020 is estimated at 3.8%, higher than the industry average of 1.5%.
Further, the company’s long-term (three-five years) estimated EPS growth rate of 5.1% promises rewards for investors.
Revenue Growth: Eaton Vance’s top-line growth looks impressive. Revenues (on a GAAP basis) witnessed a CAGR of 7.8% over the last four fiscal years (2016-2019). The increase was mainly driven by improving AUM balance, which witnessed a CAGR of 13.9% over the same period.
Thus, the company’s diverse product offerings and investment strategies will continue to attract investors, which along with improving AUM balance are expected to support revenue growth in the upcoming quarters.
Notably, the company’s projected sales growth rates of 7.4% for fiscal 2020 and 6.1% for fiscal 2021 ensure the continuation of the upward trend in revenues.
Impressive Capital Deployment: In October 2019, the company announced a dividend hike for the 39th consecutive fiscal year. Also, it has an efficient share repurchase plan in place. As of Oct 31, 2019, 6.3 million shares remained available under its buyback authorization.
Given its strong capital position and decent earnings growth, the company will be able to sustain capital deployment plans, thus enhancing shareholder value.
Superior Return on Equity (ROE): Eaton Vance’s ROE of 35.32% as compared with the industry average of 12.28% highlights the company’s commendable position over its peers.
Favorable Valuation: The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.
Key Picks
Cohen & Steers, Inc CNS witnessed an upward earnings estimate revision of 3.7% for the current year, over the past 60 days. Moreover, the stock has rallied 84% in the past year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Virtus Investment Partners, Inc VRTS also sports a Zacks Rank of 1. Its Zacks Consensus Estimate for current-year earnings has been revised 3.8% upward over the past 60 days. Furthermore, the company’s shares have gained 27.8% in the past year.
Over the last 60 days, the Zacks Consensus Estimate for 2019 earnings for Federated Investors, Inc FII increased 4%. Additionally, the stock has jumped 30.6% over the past 12 months. It currently carries a Zacks Rank #2 (Buy).
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