3 Reasons to Sell IVZ and 1 Stock to Buy Instead

What a fantastic six months it’s been for Invesco. Shares of the company have skyrocketed 69.7%, setting a new 52-week high of $28.37. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.

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 for active Edge members.

Why Do We Think Invesco Will Underperform?

We’re happy investors have made money, but we're swiping left on Invesco for now. Here are three reasons why IVZ doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Flatter Than a Pancake

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

Unfortunately, Invesco struggled to consistently increase demand as its $4.56 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.

2. EPS Growth Has Stalled

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Invesco’s EPS was flat over the last five years, just like its revenue. This performance was underwhelming across the board.

3. Previous Growth Initiatives Haven’t Impressed

Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.

Over the last five years, Invesco has averaged an ROE of 5.8%, uninspiring for a company operating in a sector where the average shakes out around 10%.

Final Judgment

Invesco falls short of our quality standards. After the recent surge, the stock trades at 11.2× forward P/E (or $28.37 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward one of Charlie Munger’s all-time favorite businesses.

Stocks We Would Buy Instead of Invesco

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