The stock of SEI Investments Co (NAS:SEIC, 30-year Financials) is believed to be fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $61.91 per share and the market cap of $8.9 billion, SEI Investments Co stock is believed to be fairly valued. GF Value for SEI Investments Co is shown in the chart below.
Because SEI Investments Co is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 6.3% over the past three years and is estimated to grow 4.27% annually over the next three to five years.
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Since investing in companies with low financial strength could result in permanent capital loss, investors must carefully review a company's financial strength before deciding whether to buy shares. Looking at the cash-to-debt ratio and interest coverage can give a good initial perspective on the company's financial strength. SEI Investments Co has a cash-to-debt ratio of 19.20, which ranks in the middle range of the companies in Asset Management industry. Based on this, GuruFocus ranks SEI Investments Co's financial strength as 9 out of 10, suggesting strong balance sheet. This is the debt and cash of SEI Investments Co over the past years:
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Typically, a company with high profit margins offers better performance potential than a company with low profit margins. SEI Investments Co has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $1.7 billion and earnings of $3.01 a share. Its operating margin of 26.48% in the middle range of the companies in Asset Management industry. Overall, GuruFocus ranks SEI Investments Co's profitability as strong. This is the revenue and net income of SEI Investments Co over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of SEI Investments Co is 6.3%, which ranks better than 68% of the companies in Asset Management industry. The 3-year average EBITDA growth rate is 3.9%, which ranks in the middle range of the companies in Asset Management industry.
Another method of determining the profitability of a company is to compare its return on invested capital to the weighted average cost of capital. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, SEI Investments Co's return on invested capital is 31.28, and its cost of capital is 8.28. The historical ROIC vs WACC comparison of SEI Investments Co is shown below:
In conclusion, The stock of SEI Investments Co (NAS:SEIC, 30-year Financials) gives every indication of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks in the middle range of the companies in Asset Management industry. To learn more about SEI Investments Co stock, you can check out its 30-year Financials here.
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