Benefits from a stabilizing economy and gradually improving interest-rate scenario have positioned the investment management industry well. Investment managers are expected to benefit from a rising rate environment in the soon-to-be concluded quarter.
Additionally, most investment managers have waived off the majority of their fees with the rates rising since 2016. This decline in fee waivers is expected to aid the company’s top-line growth in their upcoming results.
Despite inflation-related issues and increasing chances of economic uncertainty, most of the asset managers have performed decently in their assets under management numbers in the first two months of the quarter. Moreover, with expectations of increased volatility, performance of asset managers is expected to be decent.
Therefore, we are focusing on two investment managers, Waddell & Reed Financial, Inc. (NYSE:WDR) and Lazard Ltd (NYSE:LAZ) .
Waddell & Reed, with a market cap of $1.8 billion, provides a wide range of investment management and advisory services in the United States. On the other hand, Lazard operates as a financial advisory and asset management firm globally and has a market cap of $6.6 billion.
Waddell & Reed sports a Zacks Rank #1 (Strong Buy) with a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Lazard has a Zacks Rank #2 with a Value Score of C. You can see the complete list of today’s Zacks #1 Rank stocks here.
Though both asset managers have similar business trends, deeper research into the financials will help decide which investment option is better.
Price Performance
Though both the asset managers have underperformed the industry (up 17.3%) over the past year, they have gained decently. While shares of Waddell & Reed have gained 16.1%, Lazard has spiked 12.4%. So, Waddell & Reed performed better than Lazard.
Dividend Yield
Both the companies have been deploying capital in terms of dividend payments to enhance shareholder value. Waddell & Reed has a current dividend yield of 5.06% while Lazard has a dividend yield of 3.17%.
Although both the stocks’ dividend yield is better than the industry’s average of 2.54%, shareholders of Waddell & Reed gain more.
Leverage Ratio
Both Waddell & Reed and Lazard have higher debt-to-equity ratio compared with the industry average of 0.09. But Waddell & Reed with a ratio of 0.11 has an edge over Lazard with the same of 0.95.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Waddell & Reed and Lazard is 16.63% and 38.93%, respectively. While both stocks have scored above the industry’s level of 12.46%, Lazard reinvests its earnings more efficiently.
Earnings Estimate Revisions & Growth Projections
The Zacks Consensus Estimate for 2018 earnings of Waddell & Reed has increased 6.2%, over the last 30 days. On the other hand, the same for Lazard has remained stable for 2018, over the same time frame.
Moreover, earnings for Waddell & Reed for the current year are projected to jump 16.7% year over year. For Lazard, the Zacks Consensus Estimate stands at $3.99 for 2018, reflecting a year-over-year increase of 5.6%.
Therefore, Waddell & Reed has an edge here as well.
Conclusion
Our comparative analysis shows that Waddell & Reed is better positioned than Lazard when considering price performance, dividend yield, leverage ratio, earnings growth expectations and Value Score. Lazard wins on reinvesting potential.
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Waddell & Reed Financial, Inc. (WDR): Free Stock Analysis Report
Lazard Ltd (LAZ): Free Stock Analysis Report
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Zacks Investment Research