Invesco (IVZ) Stock Could Trade Below Fair Value After A 151% Run

Invesco has posted a sharp 3 year share price gain, and that kind of move naturally raises the question of whether the current valuation is supported by the returns it earns on its capital. With the stock recently closing at US$28.06, investors now have to weigh the recent run against the underlying economics of the asset management business.

• The share price is up 150.7% over 3 years, which puts a lot of weight on Invesco's ability to keep earning attractive returns on the money it deploys.
• The firm depends heavily on how efficiently it turns client assets under management into fee income and free cash flow, which can influence both its capacity to reinvest and the level of returns it generates on its own capital base.
• Prefer to judge Invesco on sales? See why Invesco's 1.8x P/S tells a different valuation story.

The stock's next move may depend on whether the returns Invesco earns on its capital are strong enough to justify the price implied by that recent performance.

If you want more starting points alongside Invesco while you think about the returns it earns on its capital, a focused stock screen built around 27 high quality undervalued stocks can help frame your next round of research.

Is Invesco Still Cheap on Excess Returns?

The Excess Returns model looks at what Invesco earns over and above its cost of equity on each dollar of shareholder capital. On this view, the firm is modeled to generate Average Return on Equity of 10.54% on a Book Value base of $22.56 per share, with Stable EPS of $3.36 per share. Against a Cost of Equity of $2.60 per share, that leaves an estimated Excess Return of $0.76 per share, which is the engine for any value beyond the balance sheet.

Analyst inputs in the model also point to Stable Book Value of $31.90 per share over time, suggesting the capital base itself is expected to grow rather than remain flat. When these projected excess returns are discounted back and compared with the current share price of $28.06, the Excess Returns projections put Invesco's estimated intrinsic value substantially above the current share price. Find out what Invesco could be worth using our Excess Returns estimate.

The Invesco Narrative: What Would Justify Today's Price?

Narratives pick up where the valuation puzzle leaves off for Invesco. They spell out which future paths for growth, margins and earnings would need to play out for the shares to end up worth meaningfully more or less than today's price, and each scenario ties a fair value to a specific mix of potential catalysts and risks so you can track over time which interpretation of Invesco's story is gaining traction.

One of the top community narratives on Invesco: 31% undervalued

"The numbers indicate that Invesco’s share price does not fully reflect record AUM, operating leverage, lower leverage ratio and ongoing capital returns..."

Discover why this Narrative puts Invesco at 31% undervalued.

The Invesco share price is only one piece of the decision

Numbers on excess returns tell part of the story, but you also need to know who is steering Invesco, how they are rewarded, and whether those incentives line up with your interests. See who runs Invesco and how they are paid.

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