IVZ Invesco
Growing ETF franchise tied to a shrinking active business; returns on book roughly equal cost of equity, so the stock looks fully priced.
The story
Invesco is a scaled global asset manager whose QQQ and ETF franchise is growing, while its active equity business keeps losing assets to passive products. The negative GAAP results come from non-cash intangible impairments and restructuring charges. Adjusted earnings run near $0.9B, but book equity is mostly goodwill and fund-management intangibles, so returns on book stay in the high single digits to low double digits. With more fee-generating assets and the MassMutual preferred being retired, the balance sheet is getting cleaner, but pressure on fees and heavy exposure to market levels remain.
A normalized ROE of 10.5% reflects adjusted earnings of roughly $0.9-1.0B on about $9.7B of book equity that is heavy in intangibles. That is roughly equal to a cost of equity near 10.8% at beta 1.3, so value stays close to book. Book grows slowly because buybacks and dividends absorb most earnings. The market price of about 1.4x book implies more ETF-driven margin gains than this normalized return supports.
Value drivers
| Return on equity (normalized) | 10.5% |
| Book-value growth (Y1) | 3.0% |
| Terminal book growth | 3.0% |
| Beta | 1.30 |
| Failure probability | 2.0% |
| Cost of equity | 10.8% |
Valuation bridge
| PV of excess returns | -201.97M |
| PV of terminal excess | -187.45M |
| Equity value | 9.14B |
| ÷ shares → per share | $20.71 |
News
neutral +0.10 · 8 articles
- Better Healthcare ETF: Invesco's Biotech-Focused IBBQ vs. iShares' Broad IYH
- Better Energy Sector ETF: Vanguard's VDE Targeting Traditional Oil and Gas Giants vs. Invesco's Solar-Focused TAN
- One of These Growth ETFs Has a 10-Year Record. The Other Is Beating It Anyway.
- Do Employees Even Want Alts in 401(k)s?
- Nasdaq Ends Nearly 3% Higher As AI Stocks Pop, AMD Enters $1 Trillion Club — AMD, ARM, META, AMZN, PSKY In Focus
- Forget JEPI: Invesco’s Equal-Weight Income Fund Is Beating It by 6+ Points With Lower Fees
- SEC Gives a Nod to Nocturnal Traders
- Should Invesco S&P MidCap 400 Pure Growth ETF (RFG) Be on Your Investing Radar?
Projected excess returns on equity
| Yr | Book equity | ROE | Excess return | PV |
|---|---|---|---|---|
| 1 | 9.72B | 10.5% | -30.43M | -27.46M |
| 2 | 10.01B | 10.5% | -31.34M | -25.52M |
| 3 | 10.31B | 10.5% | -32.28M | -23.72M |
| 4 | 10.62B | 10.5% | -33.25M | -22.05M |
| 5 | 10.94B | 10.5% | -34.24M | -20.49M |
| 6 | 11.27B | 10.5% | -35.27M | -19.05M |
| 7 | 11.61B | 10.5% | -36.33M | -17.71M |
| 8 | 11.95B | 10.5% | -37.42M | -16.46M |
| 9 | 12.31B | 10.5% | -38.54M | -15.30M |
| 10 | 12.68B | 10.5% | -39.70M | -14.22M |
Key risks
- Continued fee compression and outflows from active equity
- Market drawdown cutting AUM and operating leverage, with high beta to equity markets
- More impairments of goodwill and intangibles from past acquisitions such as OppenheimerFunds
Catalysts
- Continued inflows to QQQ and ETFs, plus margin gains from the Alpha platform and cost cuts
- Faster preferred redemption and common buybacks that raise the return to common shareholders