The financials sector is showing promising signs, with projections indicating a strong rebound in earnings. Analysts anticipate S&P 500 earnings growth of 14.8% in 2025, and the financials sector is expected to rise by 9.0%. This favorable environment makes it crucial to identify companies that can capitalize on this momentum. This article examines three financials stocks—Janus Henderson Group PLC (JHG), Invesco Ltd. (IVZ), and Virtu Financial Inc. (VIRT)—using AAII’s A+ Stock Grades to provide insight into their potential.
Financials Sector Outlook
FactSet’s S&P 500 earnings preview reports that analysts now expect S&P 500 earnings growth of 14.8% in 2025, marking a strong rebound compared to recent years. Net profit margins for the S&P 500 are anticipated to reach their highest levels since 2008, at approximately 13.0%. Earnings for the financials sector are projected to rise 9.0% in 2025.
Noninterest income is also expected to increase. As the Deloitte Center for Financial Services’ outlook highlights, ‘Noninterest income as a percentage of average assets is estimated to increase to nearly 1.5%,’ the highest level seen in five years. This rise is supported by higher investment banking fees driven by ‘a renewed [mergers and acquisitions (M&A)] pipeline, greater demand for capital from companies and private equity sponsors, and elevated trading volumes.’
Given these favorable conditions, companies such as Janus Henderson Group, Invesco, and Virtu Financial may represent attractive opportunities for investors looking to gain exposure to the financials sector’s positive momentum.
AAII’s A+ Stock Grades: An Objective Framework
AAII created the A+ Stock Grades, which evaluate companies across five factors that research and real-world investment results indicate to identify market-beating stocks in the long run: value, growth, momentum, earnings estimate revisions (and surprises), and quality.
AAII’s A+ Stock Grade Summary for Three Financials Stocks
Janus Henderson Group PLC (JHG)
Janus Henderson Group PLC (JHG) is an asset management holding entity providing services to institutional, retail, and high-net-worth clients. The firm manages separate client-focused equity and fixed-income portfolios and equity, fixed-income, and balanced mutual funds. It invests in public equity and fixed-income markets, as well as in real estate and private equity. Founded in 1934 and based in London, the company also has offices in Jersey and Sydney.
Janus Henderson Group has a Value Grade of B, based on its Value Score of 71, indicating good value. The company’s shareholder yield is 7.7%, ranking in the ninth percentile among all U.S.-listed stocks. Its price-to-free-cash-flow ratio is 14.1, below the sector median of 15.0, suggesting potential undervaluation. The Momentum Grade is B, with a Momentum Score of 62, reflecting strong price momentum over the last four quarters. The Growth Grade is also B, supported by a five-year annualized sales growth rate of 2.4% and consistent positive cash from operations.
Invesco Ltd. (IVZ)
Invesco Ltd. (IVZ) is a publicly owned investment manager providing services to retail, institutional, and high-net-worth clients, among others. The firm manages various types of mutual funds and exchange-traded funds (ETFs) and invests in public equity and fixed-income markets globally, as well as alternative markets. Founded in 1935 and based in Atlanta, Georgia, Invesco has a Quality Grade of B, based on a score of 78, indicating strong quality.
Invesco ranks strongly in terms of its return on invested capital and F-Score, with a return on invested capital of 163.9% and an F-Score of 8. The Value Grade is A, based on a score of 82, reflecting deep value. The company ranks in the cheapest 14th percentile for its price-to-book ratio and in the cheapest 39th percentile for its price-to-sales ratio. The Momentum Grade is C, with a Momentum Score of 47, indicating average momentum.
Virtu Financial Inc. (VIRT)
Virtu Financial Inc. (VIRT) operates as a financial services company globally, offering market making and execution services. The company provides offerings in execution, liquidity sourcing, analytics, and broker-neutral, capital markets, and multi-dealer platforms in workflow technology. Its products allow clients to trade on various venues across 50 countries and in various asset classes. Founded in 2008 and headquartered in New York City, Virtu Financial has a Quality Grade of B, based on a score of 67, indicating strong quality.
Virtu Financial ranks strongly in terms of its buyback yield and F-Score, with a buyback yield of 5.0% and an F-Score of 8. The Growth Grade is C, which is average, supported by positive annual cash from operations in the past five consecutive years and a five-year annualized sales growth rate of 13.1%. The Earnings Estimate Revisions Grade is B, indicating positive revisions, with a positive earnings surprise of 27.5% for the fourth quarter of 2024.
Conclusion
The financials sector presents significant opportunities for investors, with projected earnings growth and increasing noninterest income. Janus Henderson Group, Invesco, and Virtu Financial each possess unique strengths and attractive grades based on AAII’s A+ Stock Grades. Investors should conduct thorough due diligence to determine if these stocks align with their investment goals.
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