Assessing Acadian Asset Management (AAMI): Is the Current Valuation Justified After Recent Share Price Volatility?

Acadian Asset Management (NYSE:AAMI) has seen its share price shift in recent sessions, prompting a closer look at what’s driving interest from investors. With its roots in diversified financial services, there is more to explore beneath the recent moves.

See our latest analysis for Acadian Asset Management.

After an impressive rally that has left the share price up nearly 70% year-to-date, Acadian Asset Management has seen a notable pullback this week. This may reflect changing sentiment as investors weigh recent gains against potential risks. Still, its longer-term story is hard to ignore, with a five-year total shareholder return of over 150%, highlighting sustained outperformance.

If this kind of momentum sparks your curiosity, now is a perfect moment to broaden your search and discover fast growing stocks with high insider ownership

With shares pulling back from recent highs and trading below analyst targets, the question for investors is clear: is Acadian Asset Management undervalued, or is the market already anticipating all its future growth?

Price-to-Earnings of 17.3x: Is it justified?

Acadian Asset Management's price-to-earnings (P/E) ratio stands at 17.3x, just below the broader US market average of 18.2x. At the last close of $43.60, this signals that shares are priced slightly lower than the market typically assigns for each dollar of earnings, which could hint at undervaluation.

The P/E ratio compares a company's share price to its per-share earnings, making it a key yardstick for investors assessing whether a stock is expensive or cheap relative to its profits. This measure is especially relevant within the capital markets sector, where earnings volatility and cyclical swings play a critical role in pricing.

For Acadian Asset Management, the P/E ratio is well below the US capital markets industry average of 24.3x. This suggests the market may be discounting its stock despite strong earnings growth and improved profit margins. Compared to its peer group, however, AAMI looks slightly expensive since the peer average P/E stands at 14.2x. The market could be pricing in the company's recent momentum and future growth potential. The premium over peers means some caution may be warranted.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 17.3x (ABOUT RIGHT)

However, softening revenue growth or a sharper-than-expected pullback in sentiment could challenge the current momentum and put pressure on the stock’s valuation.

Find out about the key risks to this Acadian Asset Management narrative.

Another View: Discounted Cash Flow Challenges the Multiple

Taking a different angle, our DCF model values Acadian Asset Management at just $18. That is well below its current market price of $43.60. This suggests the stock could actually be overvalued if the DCF assumptions hold true. Why is there a gap between models, and what should investors make of it?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Acadian Asset Management for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 839 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Acadian Asset Management Narrative

If the above analysis doesn't quite fit your perspective, take a few minutes to dig into the data and shape your own story. Do it your way

A great starting point for your Acadian Asset Management research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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