2 Reasons to Avoid AMG and 1 Stock to Buy Instead

What a fantastic six months it’s been for Affiliated Managers Group. Shares of the company have skyrocketed 56.7%, hitting $329.49. This run-up might have investors contemplating their next move.

Is now the time to buy Affiliated Managers Group, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Affiliated Managers Group Not Exciting?

We’re happy investors have made money, but we don't have much confidence in Affiliated Managers Group. Here are two reasons we avoid AMG 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 put up a good quarter or two, but many enduring ones grow for years.

Unfortunately, Affiliated Managers Group struggled to consistently increase demand as its $2.04 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 lacking business quality.

2. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Affiliated Managers Group’s EPS grew at an unimpressive 7.8% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 1.3% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

Final Judgment

Affiliated Managers Group isn’t a terrible business, but it isn’t one of our picks. After the recent surge, the stock trades at 11.2× forward P/E (or $329.49 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our all-time favorite software stocks.

Stocks We Would Buy Instead of Affiliated Managers Group

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