Three Financials Stocks That May Ring the Bell
This week, we use AAII’s A+ Investor Stock Grades to provide insight into three financials stocks. With S&P 500 index earnings projected to grow 14.8% in 2025, should you consider the three stocks of Janus Henderson Group PLC (JHG), Invesco Ltd. (IVZ) and Virtu Financial Inc. (VIRT)?
Financials Stocks Recent News
FactSet’s S&P 500 earnings preview reports that analysts now expect S&P 500 earnings growth of 14.8% in 2025, marking a strong rebound compared to recent years; net profit margins for the S&P 500 are anticipated to reach their highest levels since 2008, at approximately 13.0%. Earnings for the financials sector are projected to rise 9.0% in 2025.
Noninterest income is also expected to increase. As the Deloitte Center for Financial Services’ outlook highlights, “Noninterest income as a percentage of average assets is estimated to increase to nearly 1.5%,” the highest level seen in five years. This rise is supported by higher investment banking fees driven by “a renewed [mergers and acquisitions (M&A)] pipeline, greater demand for capital from companies and private equity sponsors, and elevated trading volumes.”
Given these favorable conditions, companies such as Janus Henderson Group, Invesco and Virtu Financial may represent attractive opportunities for investors looking to gain exposure to the financials sector’s positive momentum.
Grading Financial Stocks With AAII’s A+ Stock Grades
When analyzing a company, it is helpful to have an objective framework that allows you to compare companies in the same way. This is why AAII created the A+ Stock Grades, which evaluate companies across five factors that research and real-world investment results indicate to identify market-beating stocks in the long run: value, growth, momentum, earnings estimate revisions (and surprises) and quality.
Using AAII’s A+ Stock Grades, the following table summarizes the attractiveness of three financials stocks — Janus Henderson Group, Invesco and Virtu Financial — based on their fundamentals.
AAII’s A+ Stock Grade Summary for Three Financials Stocks
What the A+ Stock Grades Reveal
Janus Henderson Group PLC (JHG) is an asset management holding entity. Through its subsidiaries, the firm provides services to institutional, retail and high-net-worth clients. It manages separate client-focused equity and fixed-income portfolios. The firm also manages equity, fixed-income and balanced mutual funds for its clients. It invests in public equity and fixed-income markets, as well as in real estate and private equity. Janus Henderson Group was founded in 1934 and is based in London, U.K., with additional offices in Jersey, U.K., and Sydney, Australia.
Janus Henderson Group has a Value Grade of B, based on its Value Score of 71, which is good value. Higher scores indicate a more attractive stock for value investors and, thus, a better grade. The Value Grade is the percentile rank of the average of the percentile ranks of the price-to-sales (P/S) ratio, price-earnings (P/E) ratio, price-to-book-value (P/B) ratio, price-to-free-cash-flow (P/FCF) ratio, shareholder yield and the ratio of enterprise value to earnings before interest, taxes, depreciation and amortization (EBITDA).
Janus Henderson Group has a shareholder yield of 7.7%, which ranks in the ninth percentile among all U.S.-listed stocks. Its price-to-free-cash-flow ratio is 14.1, which ranks in the 37th percentile and is below the sector median of 15.0. This suggests that Janus Henderson Group’s stock may be undervalued in terms of its ability to generate free cash flow compared to similar companies in its sector.
Janus Henderson Group has a Momentum Grade of B, based on its Momentum Score of 62. This means that the stock’s momentum is strong in terms of its weighted relative price strength over the last four quarters. The weighted four-quarter relative strength rank is the relative price change for each of the past four quarters, with the most recent quarterly price change given a weight of 40% and each of the three previous quarters given a weight of 20%. The quarterly ranks are 41, 79, 72 and 67, sequentially from the most recent quarter, with higher ranks signaling stronger price momentum. The weighted four-quarter relative price strength is 0.6%.
Janus Henderson Group has a Growth Grade of B, which is strong. The components of the Growth Composite Score consider a company’s success in growing sales on a year-over-year and long-term annualized basis and its ability to consistently generate positive cash from its core operations. The company has a five-year annualized sales growth rate of 2.4% and has generated positive annual cash from operations in the past five consecutive years.
Invesco Ltd. (IVZ) is a publicly owned investment manager. The firm provides its services to retail clients, institutional clients, high-net-worth clients, public entities, corporations, unions, nonprofit organizations, endowments, foundations, pension funds, financial institutions and sovereign wealth funds. It manages separate client-focused equity and fixed-income portfolios. The firm launches and manages various types of mutual funds and exchange-traded funds (ETFs) for its clients. The firm also launches and manages private funds. It invests in public equity and fixed-income markets across the globe. The firm also invests in alternative markets, such as commodities and currencies. Invesco was founded in 1935 and is based in Atlanta, Georgia.
Invesco has a Quality Grade of B, based on a score of 78, which is strong. Higher-quality stocks possess traits associated with upside potential and reduced downside risk. The Quality Grade is the percentile rank of the average of the percentile ranks of return on assets (ROA), return on invested capital (ROIC), gross profit to assets, buyback yield, change in total liabilities to assets, accruals to assets, Z double prime bankruptcy risk (Z) score and F-Score. To be assigned a Quality Score, stocks must have a valid (non-null) measure and corresponding ranking for at least four of the eight quality measures.
Invesco ranks strongly in terms of its return on invested capital and F-Score. It has a return on invested capital of 163.9% and an F-Score of 8. The F-Score is a number between 0 and 9 that assesses the strength of a company’s financial position. It considers the profitability, leverage, liquidity and operating efficiency of a company. Higher numbers are better.
The weakest component in the stock’s Quality Grade is its accruals-to-assets ratio of –1.5%, which ranks in the lowest 28th percentile of all stocks.
Invesco has a Value Grade of A, based on a score of 82, which is deep value. The company ranks in the cheapest 14th percentile for its price-to-book ratio and in the cheapest 39th percentile for its price-to-sales ratio. The company has a price-to-book ratio of 0.46 and a price-to-sales ratio of 1.19. A higher shareholder yield is also considered better value, and Invesco has a shareholder yield of 4.7%, compared to the sector median of 2.2%.
The company has a Momentum Grade of C, based on its Momentum Score of 47. This means that the stock’s momentum is average in terms of its weighted relative price strength over the last four quarters. The quarterly ranks are 44, 56, 66 and 57, sequentially from the most recent quarter. The weighted four-quarter relative price strength is –3.2%.
Virtu Financial Inc. (VIRT) operates as a financial services company in the U.S. and internationally. It operates through two segments: market making and execution services. The company’s products includes offerings in execution, liquidity sourcing, analytics, and broker-neutral, capital markets, and multi-dealer platforms in workflow technology. Its product allows its clients to trade on various venues across 50 countries and in various asset classes, including global equities, ETFs, options, foreign exchange, futures, fixed income, cryptocurrencies and myriad other commodities. The company’s multi-asset analytics platform provides a range of pre- and post-trade services, data products, and compliance tools for clients to invest, trade and manage risk across global markets. Virtu Financial was founded in 2008 and is headquartered in New York City, New York.
Virtu Financial has a Quality Grade of B, based on a score of 67, which is strong. The company ranks strongly in terms of its buyback yield and F-Score. Its buyback yield of 5.0% ranks in the 91st percentile among all U.S.-listed stocks. Its F-Score of 8 ranks in the 93rd percentile.
The company’s Growth Grade is C, which is average. Virtu Financial has realized positive annual cash from operations in the past five consecutive years. It also has a five-year annualized sales growth rate of 13.1%.
Earnings estimate revisions indicate whether analysts’ expectations for the firm’s profits have improved or worsened. Virtu Financial has an Earnings Estimate Revisions Grade of B, based on a score of 67, which is positive. The grade is based on the statistical significance of its latest two quarterly earnings surprises and the increases in consensus earnings estimate for the current fiscal year over the past month and past three months.
Virtu Financial reported a positive earnings surprise of 27.5% for the fourth quarter of 2024. For the third quarter of 2024, it reported a positive earnings surprise of 3.7%. Over the last three months, the consensus earnings estimate for full-year 2025 has been revised upward from $3.135 to $3.767 per share.
__
The stocks meeting the criteria of the approach do not represent a “recommended” or “buy” list. It is important to perform due diligence.
If you want an edge throughout this market volatility, become an AAII member.
