A prudent investment decision involves buying well-performing stocks at the right time while selling those that are at risk. A rise in share price and strong fundamentals signal a stock’s bullish run.
Broadridge Financial Solutions Inc. (NYSE:BR) is a technology-based outsourcing solutions provider that has performed extremely well so far this year and has the potential to sustain the momentum in the near term. Consequently, if you haven’t taken advantage of the share price appreciation yet, it’s time you add the stock to your portfolio.
What Makes Broadridge an Attractive Pick?
An Outperformer: A glimpse of the company’s price trend reveals that the stock has had an impressive run on the bourse in the past year. Shares of Broadridge have returned a massive 65%, which compares favorably with the industry’s gain of 23.3%.
Solid Rank & VGM Score: Broadridge currently carries a Zacks Rank #2 (Buy) and a Value Growth Momentum Score (VGM Score) of B. Our research shows that stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions: The direction of estimate revisions serves as an important pointer when it comes to the price of a stock. Over the last 30 days, the Zacks Consensus Estimate for 2018 earnings increased 4.2% to $4.21 per share. Estimates for 2019 increased 2% to $4.50 per share.
Positive Earnings Surprise History: Broadridge has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in three of the previous four quarters, recording an average positive earnings surprise of 23.6%.
Strong Growth Prospects: The Zacks Consensus Estimate for 2018 earnings is currently pegged at $4.21, reflecting year-over-year growth of 34.5%. Moreover, earnings are expected to register 6.9% growth in 2019. The stock has long-term expected earnings per share growth rate of 10%.
Growth Factors
Strong Business Model
Broadridge has a strong business model wherein it earns significant recurring fee revenues, which include contributions from net new business, internal growth and acquisition-related synergies. Notably, revenues for fiscal 2017, 2016 and 2015 came in at $4.143 billion, $2.897 billion and $2.694 billion, respectively, representing year-over-year growth of approximately 43%, 7.5% and 5.3%, respectively.
Strategic Buyouts
Broadridge’s focus on enhancing its internal growth with strategic acquisitions is encouraging. On Mar 27, 2018, Broadridge completed the acquisition of ActivePath at an aggregate price of $25 million. The buyout should help Broadridge enhance consumer experience by transforming and improving its digital platform. In third-quarter fiscal 2018, the company declared that it has deployed almost $103 million for acquisitions year-to-date.
In fiscal 2017, it acquired Summit Financial Disclosure, LLC., a full service financial document management solutions provider, and Message Automation Limited, a leading specialist provider of post-trade control solutions. The company’s 2016 acquisitions include DST Systems’ North American Customer Communications (NACC) business, 4sight Financial Software Limited and Inveshare.
We remain encouraged by the company’s acquisition spree, which is helping Broadridge to expand its product portfolio and customer reach.
Shareholder Friendly Moves
We are impressed with Broadridge’s consistent record of returning value to shareholders in the form of dividend and share repurchases. In fiscal 2017, Broadridge repurchased $342.8 million worth of its treasury stock and paid dividend amounting to $152.2 million. Continuing the same strategy, the company repurchased $3 million worth of its treasury stock and paid dividend of $80.4 million during first-half of fiscal 2018.
In third-quarter fiscal 2018, the company returned $123 million to its shareholders in the form of dividends compared with $80.4 million in second-quarter fiscal 2018. These shareholder-friendly initiatives not only instill investors’ confidence but also positively impact earnings per share.
Other Stocks to Consider
Some other top-ranked stocks in the broader Business Services sector include TriNet Group, Inc. (NYSE:TNET) , Automatic Data Processing (NASDAQ:ADP) and The Brink’s Company (NYSE:BCO) . While Trinet sports a Zacks Rank #1, Automatic Data Processing and Brink’s Company carry a Zacks Rank #2.
In the trailing four quarters, Trinet, Automatic Data Processing and Brink’s Company delivered a positive earnings surprise of 60.4%, 5.2% and 10.9%, respectively.
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Automatic Data Processing, Inc. (ADP): Free Stock Analysis Report
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