On Wednesday, T. Rowe Price (NASDAQ:TROW) retained its In Line rating and $116.00 price target from Evercore ISI. The firm observed that T. Rowe Price is currently in a transitional phase, with recent performance improvements expected to gradually influence the company's financial results. Despite a period of significant fund outflows, which were particularly impactful from 2020 until now, the current trend in performance is showing positive signs.
T. Rowe Price's funds, which did not significantly affect the company's outflows between 2016 and 2019, began to contribute an average of 40% to gross outflows from 2020 onwards. Evercore ISI highlighted that while performance is on an upward trajectory, it will require additional time to fully impact the company's standing and to counterbalance previous underperformance.
The firm also provided a detailed examination of the fund-level investment performance at T. Rowe Price. Anticipation of flow improvements is already reflected in market expectations, with projected outflows decreasing from $82 billion in 2023 to $38 billion in 2024, followed by a further reduction to $13 billion in 2025. These projections take into account an $8 billion outflow in the first quarter and April of 2024.
T. Rowe Price's stock has experienced a 6% increase year-to-date, significantly outperforming the peer median by 1,000 basis points. This growth has been attributed to improved investment performance and robust equity markets. Should these conditions persist, further positive developments could be expected.
Moreover, the company's valuation multiple has decreased by 2.5 turns this year, now trading at 13 times the forecast for the following year's earnings. This valuation places T. Rowe Price at a 3-turn premium compared to the 5-turn premium it held at the start of 2024.
In other recent news, T. Rowe Price Group, Inc. reported its preliminary month-end assets under management amounting to $1.48 trillion as of April 30, 2024. The firm experienced net outflows of $7.8 billion during the month. Equity assets stood at $762 billion, fixed income, including money market assets, were reported at $169 billion, multi-asset class investments totaled $506 billion, and alternatives remained steady at $48 billion.
Moreover, T. Rowe Price reported a strong start to 2024 with a notable increase in assets under management (AUM) and a significant rise in earnings per share. In the first quarter, the company's AUM grew by 15% to $1.54 trillion, despite facing $8 billion in net outflows. Adjusted earnings per share for the quarter jumped by 40% to $2.38. These are the recent developments for T. Rowe Price.
InvestingPro Insights
As T. Rowe Price (NASDAQ:TROW) navigates through its transitional phase, recent metrics from InvestingPro reveal a robust financial picture which could be of interest to investors. With a market capitalization of $25.58 billion and a trailing P/E ratio that has slightly increased to 13.69, the company appears to be trading at a reasonable valuation relative to its near-term earnings growth. Additionally, a PEG ratio of 0.36 suggests that TROW's stock price is potentially undervalued in terms of its earnings growth rate.
InvestingPro Tips underline the company's reliability in returning value to shareholders, with T. Rowe Price having maintained dividend payments for an impressive 39 consecutive years. This is further supported by a healthy dividend yield of 4.33%, which is particularly attractive in the current market environment. Moreover, the company's liquid assets surpassing short-term obligations is a testament to its financial stability. For investors looking to delve deeper into the company's prospects, there are additional InvestingPro Tips available at Investing.com. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover more valuable insights that could inform your investment decisions.
With analysts predicting profitability for the current year and the company having been profitable over the last twelve months, T. Rowe Price's financial health seems sound. The stock's performance, with a year-to-date total return of 7.45% and a 1-year total return of 8.19%, reflects the improving sentiment around the company's operational turnaround. As TROW continues to show signs of recovery, these InvestingPro Data points and Tips could provide a clearer picture for those considering an investment in this established financial institution.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.