A Fresh Look at Invesco (IVZ) Valuation Following Second-Quarter Earnings Miss and AUM Growth

Invesco (IVZ) just released its second-quarter results, and the market took notice. Adjusted earnings came in at $0.36 per share, trailing expectations and down 16% from last year, largely due to heavier operating costs. Still, it was not all grim. Assets under management rose, and the firm attracted fresh money through ETFs and international partnerships. Management’s update about upcoming “Alpha” implementation costs, plus plans for a total payout ratio around 60% this year, rounds out a mixed bag that has left some investors uncertain about what comes next.

This earnings stumble follows months of stock momentum building for Invesco. Despite a mild dip in the past month, shares are up 46% over the past three months and 31% in the last year. The long-term picture is even more pronounced, with a return just over 160% over five years, even as annual revenue edged down recently. The share price may be responding to shifting investor sentiment, as optimism about net inflows and management strategy is balanced against caution over costs and earnings trajectory.

Is this recent pullback just a pause in a bigger uptrend, or are markets already factoring in all the possible growth? Is there a real bargain here, or is it best to wait and see?

Most Popular Narrative: 6.6% Undervalued

According to the community narrative, Invesco is trading below its fair value. This suggests there may be potential upside if key business changes materialize as expected.

Invesco's strong growth in global ETF and index products such as QQQ and QQQM, along with ongoing innovation in both active and passive strategies, positions the firm to benefit from the continued investor shift toward low-cost, scalable investment options. These trends support asset growth and could lead to higher fee-based revenue and improved operating margins.

What is driving this optimistic outlook? The narrative points to operational upgrades in progress, ambitious margin targets, and the potential for a future earnings increase that could influence how this stock is valued. Which forecasts stand out as particularly bold? Interested in the numbers supporting this perspective? Explore the narrative further for more insights on what could distinguish Invesco in the market.

Result: Fair Value of $23.08 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, there are still headwinds, including rising industry competition and regulatory changes. These factors could challenge Invesco's path to higher earnings and margins.

Find out about the key risks to this Invesco narrative.

Another View: DCF Model Offers a Less Optimistic Picture

Looking through the lens of the SWS DCF model, the outlook for Invesco is more cautious. This approach suggests shares may actually be trading above what future cash flows justify. Could the current optimism be overstated, or is the market seeing something that models cannot capture?

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 Invesco 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 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 Invesco Narrative

If you are not convinced by the views shared here, or want to dig into the details yourself, you can craft your own narrative quickly in just a few minutes. Simply do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Invesco.

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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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