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What Investors Should Know about T. Rowe Price's 2Q17 Results

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Part 7
What Investors Should Know about T. Rowe Price's 2Q17 Results PART 7 OF 8

Why T. Rowe Price Group Has Premium Valuations

Higher valuations

T. Rowe Price Group (TROW) witnessed an increase of 16.4% in its assets under management (or AUM), which stood at $903.6 billion in 2Q17 as compared to $776.6 billion in 2Q16. The company has also witnessed an increase of 79% in its net operating income on a YoY basis. In 2Q17, the company’s net operating income stood at $507.6 million compared to $283.5 million in 2Q16.

Why T. Rowe Price Group Has Premium Valuations

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The one-year forward price-to-earnings ratio of T. Rowe Price Group (TROW) stood at 16.20x, while its peers’ average one-year forward price-to-earnings ratio stood at 13.74x. The company has higher valuations compared to its peers mainly due to the rise in investment advisory fees that the company witnessed in 2Q17 as compared to 2Q16, which in turn has led to a rise in net revenues in 2Q17 as compared to 2Q16. T. Rowe Price Group’s adjusted diluted earnings per share stood at $1.28 in 2Q17 as compared to $1.11 in 2Q16, reflecting a rise of 15.3%.

Price-to-book ratio

T. Rowe Price Group has a price-to-book ratio of 3.68x. On the other hand, the price-to-book ratios of other asset managers (XLF) are as follows:

  • State Street (STT): 1.65x
  • BlackRock (BLK): 2.11x
  • JPMorgan Chase (JPM): 1.35x
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