Over the past six months, T. Rowe Price’s shares (currently trading at $96.69) have posted a disappointing 6.3% loss, well below the S&P 500’s 5.1% gain. 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?
Despite the more favorable entry price, we're swiping left on T. Rowe Price for now. Here are two reasons we avoid TROW and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Over the last five years, T. Rowe Price grew its revenue at a sluggish 3.5% compounded annual growth rate. This fell short of our benchmark for the financials sector.
2. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
T. Rowe Price’s flat EPS over the last five years was below its 3.5% 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 quality test. Following the recent decline, the stock trades at 10.1× forward P/E (or $96.69 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. We’d suggest looking at one of our top digital advertising picks.
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