Invesco (IVZ): Profitability Returns But Revenue Declines Reinforce Questions on Growth Narrative

Invesco (IVZ) has seen its earnings decline by 24.7% per year over the past five years, though the company has turned a profit in the past year. Looking ahead, earnings are forecast to grow at 13.8% per year, while revenue is expected to decrease by 3.1% annually over the next three years. Investors are likely to weigh the combination of recent improved profitability and income potential against the outlook for slower than market profit growth and anticipated revenue softness.

See our full analysis for Invesco.

Next, we will see how these figures measure up against the major narratives investors are talking about right now and whether the results reinforce or reshape the story on Invesco.

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Profit Margins Projected to Surge

• Analysts expect Invesco’s profit margins to rise from 6.9% today to 22.1% in three years. This represents a substantial margin expansion, even as revenue is forecast to fall by 3.1% annually over the same period.
• According to the analysts' consensus view, this margin expansion takes place in the context of ongoing shifts toward lower-fee products and heavy fee competition.
  • The shift to index and ETF products has brought net revenue yield down to 23.2 basis points. This could weigh on margins long-term despite projected improvements.
  • Consensus narrative notes that cost management and new digital initiatives are expected to offset margin pressures from industry competition and lower-fee products.
• Consensus narrative sees efficiency gains and margin recovery reinforcing upbeat expectations, even as top-line declines. Read the full consensus breakdown for what’s behind the optimism. 📊 Read the full Invesco Consensus Narrative.

Low Price-to-Earnings vs. Peers

• Invesco’s current price-to-earnings ratio is 16x, much lower than both the US Capital Markets industry average of 26.7x and peers' average of 22.6x. This signals relative undervaluation.
• The analysts' consensus view highlights that this below-average PE ratio, combined with improving earnings quality and a potential for buybacks, adds to the bullish narrative.
  • Bulls point out that the attractive valuation and the company's progress in cost discipline and product modernization could support future stock price upside.
  • However, the slim gap between Invesco’s $24.10 share price and the $26.12 analyst target limits near-term upside, making continued margin gains crucial.

DCF Fair Value Shows Discount

• With a discounted cash flow (DCF) fair value estimate of $26.11, Invesco’s current share price of $24.10 trades at a discount. This implies 8% upside if fair value is realized.
• Analysts' consensus narrative suggests that while most see Invesco as fairly valued given modest price target upside, the DCF discount may warrant a closer look for value-focused investors.
  • The forecasted increase in net profit to $1.1 billion by 2028, along with continued deleveraging and share repurchases, underpins the long-term value case.
  • Still, the company must navigate anticipated ongoing revenue declines and growing competition, which keeps some investors cautious despite the discount to DCF fair value.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Invesco on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Invesco research is our analysis highlighting 5 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Invesco faces ongoing revenue declines and stiff competition, which could make its future growth and profit expansion less reliable than desired.

If you want to focus on companies delivering consistent earnings and reliable growth regardless of market swings, check out our stable growth stocks screener (2122 results) to find proven performers built for stability.

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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