Expanding Global ETF Reach And Tactical Acquisitions Set To Drive Growth Amid Risks

Key Takeaways

• Strategic expansions and acquisitions, particularly in Europe, position Janus Henderson for significant growth in active ETFs and diversification into emerging markets.
  
• Consistent investment performance and brand investment initiatives are likely to enhance investor appeal, driving increased client inflows and boosting long-term revenues.
  
• Exposure to regulatory, economic, and competitive challenges could risk revenues, asset growth, and operational efficiency, impacting future financial stability.

Catalysts

An asset management holding entity.

• Continuing expansion into non-US ETF markets, particularly in Europe with the acquisition of Tabula Investment Management, suggests potential for significant revenue growth from new active ETF products in equities and fixed income.
  
• Positive net inflows, especially from the intermediary channel and institutional mandates, hint at improving market share and customer acquisition, boosting future revenues.
  
• Consistent investment performance across multiple time frames positions Janus Henderson favorably against benchmarks and peers, likely enhancing its appeal to investors and contributing to sustained revenue increases.
  
• Strategic acquisitions and partnerships, such as with NBK Capital Partners, indicate potential diversification into rapidly growing segments like emerging markets private capital space, potentially impacting revenue diversification and growth.
  
• Investment in brand and strategic initiatives aimed at strengthening market position, as evidenced by improved rankings in brand recognition surveys, may drive increased client inflows and retention, positively influencing long-term revenue and earnings growth.

Assumptions

• Analysts are assuming Janus Henderson Group's revenue will grow by 2.1% annually over the next 3 years.
• Analysts assume that profit margins will increase from 20.8% today to 22.1% in 3 years time.
• Analysts expect earnings to reach $525.6 million (and earnings per share of $3.55) by about September 2027, up from $462.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.2x on those 2027 earnings, down from 12.3x today. This future PE is lower than the current PE for the AU Capital Markets industry at 20.6x.
• Analysts expect the number of shares outstanding to decline by 3.83% per year for the next 3 years.
• To value all of this in today's dollars, we will use a discount rate of 7.26%, as per the Simply Wall St company report.

Risks

• Persistent unsettled macro backdrops could lead to volatility in market gains and asset values, potentially impacting future revenues and assets under management (AUM).
  
• Dependence on net inflows for growth, especially from the intermediary and institutional channels, may be at risk in changing economic environments, possibly affecting AUM growth.
  
• Exposure to regulatory and operational risks in various geographical markets could influence compliance costs and operational efficiency, potentially impacting net margins.
  
• Intense competition in the asset management industry, including from the proliferation of ETFs and active investment products, may put pressure on management fees and revenue.
  
• Strategic initiatives, including acquisitions and partnerships (e.g., Tabula Investment Management acquisition), carry execution risks that could affect the growth trajectory and earnings.

Valuation

• The analysts have a consensus price target of $36.75 for Janus Henderson Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $46.0, and the most bearish reporting a price target of just $25.3.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be $2.4 billion, earnings will come to $525.6 million, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 7.3%.
• Given the current share price of $35.62, the analyst's price target of $36.75 is 3.1% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.