Industries: asset management, financial company
Invesco is a global investment management firm that serves retail and institutional clients with a range of investment products that include mutual funds, exchange-traded funds, savings accounts, and separately managed accounts.
| Most recent | Growth rate (CAGR) | |||
|---|---|---|---|---|
| 1 year | 5 years | 10 years | ||
| Book value of equity per share | $21.36 | 15% | 2.5% | 3.2% |
| BV including aggregate dividends | 21.2% | 7% | 6.4% | |
| Most recent | Median | |||
|---|---|---|---|---|
| 1 year | 5 years | 10 years | ||
| ROE | 13.8% | 12% | 11.7% | — |
| ROA | 3.9% | 3.6% | 4.1% | — |
| Most recent | Growth rate (CAGR) | |||
|---|---|---|---|---|
| 1 year | 5 years | 10 years | ||
| EPS | $2.75 | 33.5% | 12.6% | — |
| Annual dividends | $1.15 | 3.6% | 12.5% | — |
| Share price | $30.65 |
| Most recent | Median | |||
|---|---|---|---|---|
| 1 year | 5 years | 10 years | ||
| P/B ratio | 1.43 | 1.8 | 1.8 | 1.5 |
| P/E ratio | 11.15 | 15.2 | 15.9 | — |
A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Invesco Ltd. is a financial company. Financial companies, by their nature, typically have high debt to equity leverage, which is not a meaningful analytical metric. We suggest you use the equity to assets ratio instead.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
FASB Statement No. 167, which was effective January 1, 2010, had a significant impact on the presentation of the companys financial statements, as its provisions required the company to consolidate certain CLOs that were not previously consolidated. The cumulative effect adjustment upon adoption of FASB Statement No. 167 at January 1, 2010, resulted in an appropriation of retained earnings and a reclassification of other comprehensive income into retained earnings of $274.3 million and $5.2 million, respectively. The companys Consolidated Statement of Income for the three months ended March 31, 2010, reflect the elimination of $8.7 million in management fees earned from these CLOs, and the addition of $52.5 million in interest income, $20.8 million in interest expense, and $85.1 million in net other gains. The $105.8 million net income impact during the three months ended March 31, 2010, of consolidation of these CLOs is largely offset by gains/(losses) attributable to investors in noncontrolling interests of $104.4 million. Prior to the adoption of FASB Statement No. 167, the company accounted for its investments in these CLOs as available-for-sale investments, with changes in the value of the companys interests being recorded through other comprehensive income. After the adoption of FASB Statement No. 167, the change in value of the companys investments in these CLOs is reflected in the companys net income. For the three months ended March 31, 2010, the net impact to the company of its investments in these CLOs was $1.4 million. The Condensed Consolidated Balance Sheet at March 31, 2010, reflects the consolidation of $5.8 billion in assets held and $5.1 billion in debt issued by these CLOs, despite the fact that the assets cannot be used by the company, nor is the company obligated for the debt. Retained earnings appropriated for investors of consolidated investment products of $383.8 million is presented as part of the companys total equity, reflecting the excess of the consolidated CLOs assets over their liabilities, attributable to noncontrolling third-party investors in their consolidated CLOs at March 31, 2010. In addition, the companys Condensed Consolidated Cash Flow Statement for the three months ended March 31, 2010, reflects the cash flows of these CLOs. In accordance with the standard, prior periods have not been restated to reflect the consolidation of these CLOs.
On June 1, 2010, Invesco acquired from Morgan Stanley its retail asset management business, including Van Kampen Investments, in exchange for an aggregate of 30.9 million shares of common stock and participating preferred stock on an as converted basis and $770.0 million in cash. The acquired business brings in assets under management across the equity, fixed income and alternative asset classes (including mutual funds, variable insurance funds, separate accounts and unit investment trusts).