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How Could T. Rowe Price’s Valuation Recover?

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Mar. 14 2018, Updated 9:00 a.m. ET

Price-to-earnings ratio

T. Rowe Price (TROW) has an NTM ( next-12-month) PE (price-to-earnings) ratio of 15.0x. Competitors are valued lower, with an average ratio of 15.7x. Peers Franklin Resources (BEN), Financial Engines (FNGN), and BlackRock (BLK) have NTM PE ratios of 11.7x, 17.3x, and 18.2x, respectively.

T. Rowe Price’s valuation could fall further, as the company’s February AUM (assets under management) may be impacted by the S&P 500’s weak performance. In February 2018, the S&P 500 fell 3.9%. As of January 31, 2018, T. Rowe Price had total AUM of $1.1 trillion.

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Quarterly dividends and price targets

An increase in quarterly dividends could boost T. Rowe Price’s valuation. In all four quarters of 2017, the company declared quarterly dividends of $0.57 per share. However, on February 13, 2018, the company declared a quarterly dividend of $0.70 per share, to be paid on March 29, 2018.

T. Rowe Price’s one-year price target being higher than its current market price could also help it recover some value. Wall Street analysts have given TROW a one-year target of $117, which implies a 6.0% rise from its current price of $110.33.

Whereas T. Rowe Price has an LTM (last-12-month) PE ratio of 17.6x, peers (XLF) Franklin Resources (BEN), Financial Engines (FNGN), and BlackRock (BLK) have LTM PE ratios of 12.1x, 38.6x, and 23.3x, respectively.

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