Even though T. Rowe Price (currently trading at $103.50 per share) has gained 8.4% over the last six months, it has lagged the S&P 500’s 14.9% return during that period. This might have investors contemplating their next move.
Is now the time to buy T. Rowe Price, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is T. Rowe Price Not Exciting?
We're sitting this one out for now. Here are two reasons why TROW doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
Over the last five years, T. Rowe Price grew its revenue at a sluggish 4.3% compounded annual growth rate. This fell short of our benchmark for the financials sector.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
T. Rowe Price’s EPS grew at a weak 1.9% compounded annual growth rate over the last five years, lower than its 4.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
T. Rowe Price isn’t a terrible business, but it doesn’t pass our bar. With its shares lagging the market recently, the stock trades at 11.4× forward P/E (or $103.50 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at one of our top software and edge computing picks.
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