Inspired by recent buy of Evan @ Building Income Investments (read more) I decided to look again at T. Rowe Price. First I looked at company when share price was around $73 (read more) and I came to conclusion that I like both TROW and BEN, but it is BEN which is preferred. Then I decided to buy BEN shares in June and by now I have a decent profit (obviously unrealized). How is business of TROW going?

We can see that results for last quarter were weaker on a yearly basis:

There is one-off negative event on net profit ($0.39 per share), but revenues are declining, due to declining assets. We can see that passive ETFs are increasing in volume and active managers are struggling, but changes of single digit percentage points are not dramatic, rather neutral.

Financial situation is strong. T. Rowe Price remains debt-free with ample liquidity, including cash and discretionary sponsored portfolio investment holdings of $2.1 billionat June 30, 2016. We also have redeemable seed capital investments in sponsored investment portfolios of $1.0 billion at June 30, 2016. Less than BEN, but it is still a lot.

Weighted-average common shares outstanding have decreased since the end of 2015 as the firm expended $244.0 million in the first half of 2016 to repurchase 3.6 million shares. This is around 1.4% return to shareholders in half year so ceteris paribus it should be around 2.8% per year. Adding 3.15% dividend yield gives us around 6% return to shareholders. Awesome result.

BEN is paying less, but there are sometimes some special dividends, which significantly increase yield.

As it comes to ratios (P/E not cash adjusted):

  BEN TROW
P/E 12.8 16.3
EV/EBITDA 4.6 8.4

 

I definitely prefer BEN (although I have a long position so I am biased), because it is simply cheaper.

 

Well, TROW is a high quality company, but when comparing to BEN I see no reason to buy TROW. Surely you should never put all eggs in one basket, but objectively for now I prefer BEN to TROW (still I am not planning to increase my exposition on asset managers). If share price of TROW falls further I will consider buying.

 

Disclaimer – long BEN, no position TROW