Lazard Or OM Asset Management: Which Stock Is A Better Pick?

Lazard Ltd. (NYSE:LAZ) and OM Asset Management PLC (NYSE:OMAM) — the two investment managers — have market capitalization of $6.6 billion and $1.8 billion, respectively. Being based in the same region, both companies are influenced by a similar economic environment.

The Zacks Industry Rank is #96 (top 36% of the 250 plus Zacks industries) for the industry, to which these two companies belong to. Our back-testing shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than two to one.

Benefits from a stabilizing economy and gradually improving interest rate scenario have positioned the industry well. In terms of price performance, Lazard’s shares have gained 22.3% in the past year, while OM Asset Management’s shares have rallied 17.6%.

Though both asset managers have similar business trends, deeper research into the financials will help decide which investment option is better.

Lazard

Lazard has a trailing 12-month ROE of 38.8% compared with the industry average of 12.8%. This shows the company reinvests its earnings more efficiently.

Furthermore, the stock looks undervalued with respect to its price-to-earnings (P/E) and price-to-cash flow (P/CF) ratios. It has a P/E ratio of 14.01 compared with the S&P 500 average of 20.07. Also, the company’s P/CF of 7.94 is below the S&P 500 average of 14.8.

In addition, Lazard’s earnings for the current year are projected to be up 15.9%, while sales are likely to record 12.2% growth.

Analysts seem optimistic about the stock’s earnings prospects. Over the last 60 days, Lazard has witnessed three upward revisions (against no downward revisions) for 2017. The Zacks Consensus Estimate has moved up 3.8% to $3.58 for the current year.

Lazard has a Value Score of A and VGM Score of A. Further, the stock carries a Zacks Rank #2 (Buy). Our research shows that stocks with a Value Score and/or VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.

OM Asset Management

OM Asset Management has a trailing 12-month Return on Equity (ROE) of 114.5% compared with the industry average of 12.8%. This suggests that the company is more efficient in reinvesting its earnings.

Additionally, the stock looks undervalued with respect to its P/E and P/CF ratios. It has a forward P/E ratio of 10.68 compared with the S&P 500 average of 20.07. Furthermore, the company’s P/CF of 12.93 is below the S&P 500 average of 14.8.

Moreover, the company’s current-year earnings are projected to rise 30.9%, while sales are estimated to be up 33%.

Also, analysts seem optimistic about the stock’s financial performance. For the current year, it witnessed three upward revisions (against no downward revision) over the past two months. As a result, the Zacks Consensus Estimate for 2017 has inched up 1.3% to $1.58.

OM Asset Management currently carries a Zacks Rank #2. Also, it has a Value Score of A and a VGM Score of A. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Our Take

Both Lazard and OM Asset Management are undervalued shares and are well positioned in terms of ROE, Zacks Rank, VGM and Value Score. However, better sales and earnings growth potential, along with more reinvestment potential, make OM Asset Management a better pick.

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Lazard Ltd. (LAZ): Free Stock Analysis Report

OM Asset Management PLC (OMAM): Free Stock Analysis Report

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