Over the last six months, Artisan Partners’s shares have sunk to $36.36, producing a disappointing 14.3% loss - a stark contrast to the S&P 500’s 11% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Artisan Partners, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Artisan Partners Will Underperform?
Even with the cheaper entry price, we don’t have much confidence in Artisan Partners. Here are two reasons we avoid APAM, plus one 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 the best consistently grow over the long haul.
Over the last five years, Artisan Partners grew its revenue at a sluggish 4.4% compounded annual growth rate. This was below our standard for the financials sector.
2. EPS Growth Has Stalled
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.
Artisan Partners’s flat EPS over the last five years was below its 4.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Artisan Partners falls short of our quality standards. Following the recent decline, the stock trades at 9.8× forward P/E (or $36.36 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better investments elsewhere. Let us point you toward one of Charlie Munger’s all-time favorite businesses.
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