Asset Growth Aids SEI Investments (SEIC) Despite High Costs

SEI Investments Co. (NASDAQ:SEIC) remains well positioned for organic growth, supported by strong global presence as well as diversified products and services. Moreover, solid growth of assets under management (AUM) along with rising demand for SEI Wealth Platform (SWP) will likely boost the company's revenue prospects.

However, escalating expenses are likely to curb the company’s bottom-line growth. Further, its high dependence on fee-based revenues remains a concern.

The company’s price performance does not seem very impressive. Its shares have lost 33% over the past year compared with the industry’s decline of 18.6%.




Moreover, the company’s Zacks Consensus Estimate for current-year earnings has remained unchanged over the past 30 days. Thus, the stock currently carries a Zacks Rank #3 (Hold).

Looking at its fundamentals, SEI Investments’ revenues witnessed a CAGR of 6.4% over the last five years (2014-2018). Given the company’s strong global presence, diversified revenue mix and the acquisition of Archway Technology Partners, it remains on track to further improve top line in the near term.

Moreover, despite tough asset gathering backdrop in the back half of 2018, the company’s AUM increased at a CAGR of 8.5% over the last three years (2016-2018).

Notably, SEI Investments’ primary business platform — Investment Processing — delivers its outsourced software and processing services through TRUST 3000 and SWP. Revenues generated by these are recognized under information processing and software servicing fees, which witnessed a CAGR of 8.6% over the last three years (ending 2018). Constant innovation in software will help the company to win new clients and further aid top-line growth.

However, expenses witnessed a CAGR of 6.7% over the last five years (2014-2018) mainly due to an increase in compensation costs, and data processing and computer-related expenses. In fact, given that proprietary software is constantly upgraded, technology-related costs are likely to remain elevated, thereby hurting profitability to some extent.

Moreover, the company’s dependence on fee-based revenues has been increasing for the last few years. Significant dependence on fee income as a source of revenues might adversely affect its financials in the near term as fluctuations in markets and foreign exchange translations or regulatory changes may hamper its AUM growth.

A few better-ranked stocks from the finance space are Gladstone Investment Corporation (NASDAQ:GAIN) , Enterprise Financial Services Corp. (NASDAQ:EFSC) and Saratoga Investment Corp. (NYSE:SAR) .

Gladstone Investment’s Zacks Consensus Estimate for the current fiscal-year earnings has remained stable over the past 30 days. The stock has gained nearly 16.7% in the past three months. It currently carries a Zacks Rank #2 (Buy).

Enterprise Financial’s current-year earnings estimates have been revised 3.4% upward in the past 60 days. Further, the company’s shares have gained nearly 7.8% in the past three months. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, Saratoga Investment’s earnings estimates for the current fiscal year have remained unchanged. The stock has gained around 5.6% in the past three months. It also sports a Zacks Rank of 1.

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Enterprise Financial Services Corporation (EFSC): Free Stock Analysis Report

SEI Investments Company (SEIC): Free Stock Analysis Report

Saratoga Investment Corp (SAR): Free Stock Analysis Report

Gladstone Investment Corporation (GAIN): Free Stock Analysis Report

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