Stable growth in operations
T. Rowe Price Group (TROW) has more than doubled its revenues in the past six years. In 2014, revenues were $3.98 billion, or 50% greater than pre-crisis levels. The company also improved its operating margins to 47% in 2014, up from 43.8% in 2010. T. Rowe has grown because of its funds’ strong performance and its expanded number of product offerings in existing and new markets.
Balance sheet expansion
T. Rowe Price Group remained debt free as of December 31, 2014, with substantial liquidity and resources. On that date, the company had cash and fund investment holdings of $3.4 billion. These resources allow the company to invest as much as it needs to in technology, investment professionals, and new investment strategies.
Over time, the company has increased funding for long-term initiatives to innovate, introduce new funds, and expand its distribution channels. As a result, T. Rowe has a better capital structure than its competitors BlackRock (BLK), Invesco (IVZ), Franklin Resources (BEN), Legg Mason (LM), and Affiliated Managers (AMG). Together, these companies make up 2.77% of the Financial Select Sector SPDR Fund (XLF).
As well, T. Rowe has share repurchase plans that reflect the confidence of investment managers in their funds’ performance and overall profitability. In 2014, T. Rowe spent $415 million to repurchase 5.3 million shares of common stock at an average price of $78. As of December 31, 2014, its current market price was $87.