Invesco has been treading water for the past six months, holding steady at $27.29. The stock also fell short of the S&P 500’s 7.8% gain during that period.
Is now the time to buy Invesco, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Invesco Will Underperform?
We don’t have much confidence in Invesco. Here are three reasons why IVZ doesn’t excite us, plus one stock we’d rather own.
1. Long-Term Revenue Growth Flatter Than a Pancake
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Unfortunately, Invesco struggled to consistently increase demand as its $4.81 billion of revenue for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a sign of poor business quality.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Invesco, its EPS declined by 1.1% annually over the last five years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences.If the tide turns unexpectedly, Invesco’s low margin of safety could leave its stock price susceptible to large downswings.
3. High Debt Levels Increase Risk
Invesco reported $806.9 million of cash and $10.54 billion of debt on its balance sheet in the most recent quarter.
As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.
With $1.73 billion of EBITDA over the last 12 months, we view Invesco’s 5.6× net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.
Final Judgment
Invesco falls short of our quality standards. With its shares lagging the market recently, the stock trades at 10.7× forward P/E (or $27.29 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at one of our top digital advertising picks.
Stocks We Would Buy Instead of Invesco
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