T. ROWE PRICE GROUP INC. $66 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 254.9 million; Market cap: $16.8 billion; Price-to-sales ratio: 5.8; Dividend yield: 2.1%; TSINetwork Rating: Average; www.troweprice.com) sells mutual funds and wealth management services.
On September 30, 2012, the company had a record $574.4 billion of assets under management, up 17.3% from $489.5 billion at the end of 2011.
The company continues to see strong demand for its “Retirement Funds,” which invest in other Price Group mutual funds and automatically adjust the buyer’s portfolio balance according to their age. Retirement Funds accounted for 47% of the company’s fund sales in the latest quarter.
T. Rowe Price’s fee income varies with the value of the assets it manages, so it is also benefiting from rising stock markets.
That helped push up its revenue by 13.3% in the third quarter of 2012, to $769.7 million from $679.4 million a year earlier. Earnings rose 33.1%, to $245.7 million, or $0.94 a share, from $184.6 million, or $0.71.
The company will pay a special dividend of $1.00 a share on December 28, 2012. Even after this payment, T. Rowe Price will hold cash and investments of about $2 billion, or $7.85 a share. It also has no long-term debt. That puts it in a good position to make acquisitions or raise its regular quarterly dividend of $0.34 a share, which yields 2.1% on an annualized basis.
The stock is up 22% in the past year; it now trades at 19.6 times the company’s forecast 2012 earnings of $3.37 a share. That’s reasonable in light of the company’s strong profit potential as baby boomers save more in the years leading up to retirement.
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