Virtus Investment Partners Inc (VRTS, Financial) has recently shown a daily gain of 4.09%, with a notable 3-month gain of 17.55%. These figures, coupled with an impressive Earnings Per Share (EPS) of 18.27, raise the question of whether the stock is fairly valued at its current market price. In this analysis, we delve into the fundamentals of Virtus Investment Partners' valuation, inviting readers to explore the intricacies that determine its market position.
Company Introduction
Virtus Investment Partners Inc provides specialized investment management services, catering to both individuals and institutions. Its offerings span across various fund types, including open-end mutual funds, closed-end funds, exchange-traded funds, and variable insurance funds. Operating predominantly in the US, Virtus Investment Partners generates revenue through a mix of investment management fees, distribution and service fees, and administration and shareholder service fees. With a current stock price of $236.44 and a GF Value of $216.07, we aim to dissect whether the market has accurately priced the company's shares.
Summarize GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock, grounded in a methodology that encompasses historical trading multiples, a GuruFocus adjustment factor based on the company's past performance and growth, as well as projected future business outcomes. Virtus Investment Partners (VRTS, Financial) is currently deemed fairly valued according to the GF Value, with a market cap of $1.70 billion. This assessment suggests that the long-term return on Virtus Investment Partners stock should align closely with the company's growth rate.
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Financial Strength
Investing in companies with robust financial strength is essential to mitigate the risk of capital loss. Virtus Investment Partners' financial strength, with a cash-to-debt ratio of 0.18, falls short when compared to 78.03% of its industry peers. This places the company's overall financial strength at a modest 4 out of 10, hinting at potential vulnerabilities in its financial structure.
Profitability and Growth
Consistent profitability is a key indicator of a company's stability and lessens the risk for investors. Virtus Investment Partners has maintained profitability for the past decade, with a revenue of $824.80 million and an Earnings Per Share (EPS) of $18.27 over the last twelve months. Its operating margin of 17.31% ranks well within its industry, and the company's overall profitability score of 9 out of 10 signifies robust profitability.
When it comes to growth, Virtus Investment Partners boasts a 3-year average annual revenue growth rate of 19%, surpassing a majority of its industry counterparts. However, its 3-year average EBITDA growth rate of 5.8% indicates a middle-of-the-road performance in terms of profitability growth.
ROIC vs WACC
An insightful way to gauge a company's profitability is by comparing its Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC). Ideally, ROIC should exceed WACC to indicate efficient capital management. Virtus Investment Partners currently has an ROIC of 3.21, which falls below its WACC of 8.67, suggesting that the company may not be generating sufficient returns on its investments.
Conclusion
In conclusion, Virtus Investment Partners (VRTS, Financial) appears to be fairly valued in the current market. While the company demonstrates strong profitability, its financial condition raises concerns, and its growth is somewhat lackluster compared to industry standards. For a deeper understanding of Virtus Investment Partners' financial health, interested parties can review the company's 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
