It is interesting to see TROW share price flat over the last year, while there is a bull market all around. Asset managers are obviously exposed on situation on stock exchanges – the higher indices the better for asset managers. But it is not reflected in share price of TROW – why is that so?

Let’s look on business trends. We can see that AuM were growing over the last year, mainly due to market appreciation and income, net of distributions not reinvested.

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Although assets increased we can see that EPS was under pressure, but due to one-off. On adjusted basis growth of EPS was higher than growth of average AuM, which is a good sign.

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Company increased dividend by 5.7% to $0.57 -> $2.28 annually -> 3.2% dividend yield. Similarly to KO dividend yield is reasonable from historical perspective.

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Moreover company is buying back shares, in the last two years it was around 3.5% per annum. Together it is above 6% return to shareholders, not bad.

The biggest long term risk is shift from active strategies to passive ones: We experienced net cash outflows for the fourth quarter and the year, largely as a result of clients reallocating from active U.S. equity strategies to passive products. The trend to passive has been persistent and has accelerated in recent years. We cannot predict when it will reach a new equilibrium. Over the long term though, we expect well-executed active management to play an important ongoing role for investors and we are reinvesting in our company with the objective of sustaining the strong investment and service results we have historically achieved for our clients

 

As it comes to multiples:

P/E = 14

EV/EBITDA = 7.8

Not bad.

 

Summing up, TROW is a high quality company with reasonable valuation and dividend yield. After rally on BEN (valuation gap was narrowed mainly due to potential decrease in tax for cash held overseas) I see TROW more and more attractive. Especially if you compare TROW’s share price performance to general market, where there are all-time-highs. TROW is like 10% below all-time highs, so there is enough space for growth. It seems interesting and I am considering buying some shares.

 

Disclosure – TROW no position