Shares of Envestnet, Inc. ENV have rallied 24.7% over the past year, outperforming the 19.6% growth of the industry it belongs to.
The company has an impressive track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and matching once. The average beat is 9.4%. Its earnings for 2024 and 2025 are anticipated to grow 23.6% and 14.8%, respectively, year over year.
Envestnet, Inc Price
Envestnet, Inc price | Envestnet, Inc Quote
Factors That Bode Well
Envestnet’s robust recurring revenue is derived from asset and subscription models. It serves financial clients through a business-to-business-to-consumer approach, facilitating the delivery of its platform-based solutions. Moreover, it offers an open API framework for customers and third-party developers at the business-to-business level. The company’s recurring revenues have grown consistently, with a 2.1%, 4.5% and 20.2% year-over-year increase in 2023, 2022 and 2021, respectively.
Envestnet prioritizes technology for efficiency, competitiveness, compliance and client responsiveness. Its three-tier architecture includes a web-based UI, application tier and SQL Server database, providing scalability.
Market trends present significant opportunities for Envestnet’s technology-driven solutions. Financial planning increasingly integratesinvestment advicewith clients demanding personalized wealth management services. The rise in technology adoption is driven by the need for cost-effective, guided client interactions.
ENV’s current ratio (a measure of liquidity) at the end of the first quarter of 2024 was 1.19, higher than the prior quarter’s 0.9 and the year-ago quarter’s 0.75. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
Some Risks
Envestnet currently does not intend to pay out cash dividends on common stock. Therefore, investors seeking cash dividends should avoid buying ENV shares.
The company’s capital structure poses risks as goodwill comprises around 42% of total assets. This high percentage means that a significant portion of assets may not generate cash in case of company difficulties.
Zacks Rank and Stocks to Consider
ENV currently carries a Zacks Rank #3 (Hold).
A couple of better-ranked stocks in the broader Zacks Business Services sector are Aptiv APTV and DocuSign (DOCU). Each stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
APTV has a long-term earnings growth expectation of 16.4%.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the last four quarters. The average beat is 12.18%. Shares of Aptiv have risen in the past three months.
DOCU has a long-term earnings growth expectation of 13.3%.
The company delivered an earnings surprise of 23.7%, on average, surpassing the Zacks Consensus Estimate in three of the trailing four quarters and missing once. Shares of DocuSign have risen 16% in the past three months.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
