Long-established in the Asset Management industry, Invesco Ltd (IVZ, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.22%, juxtaposed with a three-month change of 2.03%. Fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Invesco Ltd.
What Is the GF Score?
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 5/10
- Profitability rank: 7/10
- Growth rank: 1/10
- GF Value rank: 3/10
- Momentum rank: 8/10
Based on the above method, GuruFocus assigned Invesco Ltd the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding Invesco Ltd's Business
Invesco Ltd, with a market cap of $8.013 billion, provides investment-management services to both retail (68% of managed assets) and institutional (32%) clients. As of October 2024, the firm managed $1.792 trillion in assets across various operations, including equity (58% of AUM), balanced (3%), fixed-income (22%), alternative investment (7%), and money market (10%). Notably, passive products account for 43% of Invesco's total AUM. The company is recognized as one of the 10 largest nonproprietary fund complexes in the U.S. and has a significant presence outside North America, with 29% of its AUM sourced from Europe, Africa, the Middle East, and Asia.
Financial Strength Breakdown
Invesco Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. Invesco Ltd has an interest coverage ratio of 0, which positions it worse than 0% of 451 companies in the Asset Management industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.01, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.22 indicates a struggle in handling existing debt levels.
Additionally, the company's debt-to-Ebitda ratio is 6.15, which is above Joel Tillinghast's warning level of 4 and is worse than 80.39% of 357 companies in the Asset Management industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where Invesco Ltd seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -1.9% per year over the past three years, which underperforms worse than 52.94% of 1,241 companies in the Asset Management industry. Stagnating revenues may pose concerns in a fast-evolving market.
Over the past five years, Invesco Ltd has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -6.5%, while the five-year growth rate is at -1.3%. These figures underscore potential challenges in the company's profitability. Lastly, Invesco Ltd's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Invesco Ltd's financial strength, profitability, and growth metrics, as highlighted by the GF Score, suggest potential underperformance in the future. The company's low financial strength rank, coupled with declining revenue and profitability, raises concerns about its ability to navigate the challenges ahead. Investors should carefully consider these factors when evaluating Invesco Ltd's potential for future growth and performance. For those seeking companies with strong GF Scores, GuruFocus Premium members can explore more options using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
