Assessing Invesco’s Value After 42% Rally and Recent Strategic Partnerships

• Wondering if Invesco stock is a true bargain or just riding market momentum? You are not alone. A closer look at its value might surprise you.
• After climbing 42.0% over the past year and jumping 7.0% just this past week, Invesco’s recent share price moves are catching the eyes of both value seekers and growth investors.
• Invesco’s latest surge follows news of strategic partnerships and increased institutional interest, which suggests confidence in its future positioning. Industry chatter around asset inflows and sector stability has also influenced sentiment and helped explain the lift in its share price.
• The company currently scores a 3/6 on our valuation checks. This indicates that there are still a few areas where it may be undervalued. We will dive deep into the common ways investors assess value, but stay with us to the end for an approach that brings even more clarity to judging if Invesco is worth your attention.

Invesco delivered 42.0% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Invesco Excess Returns Analysis

The Excess Returns model evaluates a company’s value by comparing its return on invested capital to its cost of equity. In short, it looks at how much profit Invesco is generating from shareholders’ funds against the minimum return that investors require for the risk they are taking.

For Invesco, the average return on equity over the past five years has been 5.03%. The book value stands at $24.70 per share, with a stable figure based on the last five years’ median of $23.95 per share. Stable earnings per share work out to $1.20, while the calculated cost of equity is $2.02 per share. Notably, the excess return, which is what remains after covering the cost of equity, is negative at $-0.82 per share. These figures suggest that Invesco’s ability to generate returns above its cost of capital is currently limited.

The intrinsic value calculated by the Excess Returns model is significantly lower than the current share price. This implies the stock is roughly 200.2% overvalued based on this method. In other words, by this measure, the stock price reflects expectations for much greater profitability than Invesco is currently delivering.

Result: OVERVALUED

Our Excess Returns analysis suggests Invesco may be overvalued by 200.2%. Discover 926 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Invesco.

Approach 2: Invesco Price vs Earnings

The Price-to-Earnings (PE) ratio is a key valuation metric for profitable companies like Invesco because it tells investors how much they are paying today for each dollar of earnings. It is especially helpful when companies have positive and stable earnings, as it provides a straightforward way to compare the stock’s valuation with its own history, sector, and peers.

What counts as a “normal” or “fair” PE depends on growth expectations and perceived risks. Higher growth and lower risk typically justify a higher PE, while slower growth or higher risk tend to lower what investors are willing to pay for each dollar of profit.

Currently, Invesco trades on a PE ratio of 16.3x. This lines up closely with its peer average of 16.4x but is notably lower than the Capital Markets industry average of 23.5x. At first glance, this might make Invesco look undervalued compared to the broader sector, but these numbers do not account for specific company traits.

This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio, calculated to be 19.1x for Invesco, reflects a more nuanced view by incorporating factors like the company’s profit margins, growth prospects, market cap, industry context, and unique risks. This makes it a more relevant measure of whether Invesco’s current valuation is justified.

Comparing Invesco’s current PE to its Fair Ratio, the two are within just a few points of each other. This suggests the market has it about right at today’s price levels.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1432 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Invesco Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. Narratives are your personal, story-driven perspectives on a company, linking the numbers, such as estimated fair value, future earnings, and margins, to the reasons behind them. Instead of only relying on traditional ratios, Narratives connect a company’s business context or industry changes to a forecast and a fair value, providing a bigger picture that matches your own investment view.

On Simply Wall St's Community page, where millions of investors share their perspectives, Narratives are easy to create and update. This makes them accessible for all experience levels. Narratives help you quickly decide how Invesco’s fair value aligns with the latest price by showing how your perspective compares and automatically refreshing as new earnings or news emerge.

For example, some investors believe Invesco's disciplined cost management and growth in exchange-traded funds will lift its fair value above $29, while others see risks from competition and margin pressure, putting fair value closer to $17. Narratives let you choose and continually refine the perspective that most closely matches your own, turning valuation into an active, dynamic process.

Do you think there's more to the story for Invesco? Head over to our Community to see what others are saying!

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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