TROW - T. Rowe Price: Mixed Signals (Technical Analysis)

2024-03-27 13:36:27 ET

Summary

• I see a range of mixed signals facing T. Rowe Price Group, Inc. and hence rate it as a HOLD.
• In terms of business fundamentals, I see a choppy road ahead for asset growth and profitability pressure.
• In terms of valuation, its current dividend yield suggests undervaluation, but its P/E ratio suggests the opposite.

Thesis

My goal is to argue for a hold thesis on T. Rowe Price Group, Inc. (TROW) based on the mixed signals I am seeing. For its business fundamentals, I am seeing a choppy road ahead for it to grow its assets under management (“AUM”). It has also been suffering from declining profitability as reflected in its ROE (return on equity). For its valuation, the currently high dividend yield offers income appeal and signal undervaluation. But the above-average-P/E suggests the opposite. Finally, TROW faces both generic asset management risks like market downturns and fee compression, alongside unique risks like its concentration in active funds and reliance on traditional distribution channels....

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