Artisan Partners is an asset management company based out of Milwaukee Wisconsin and has offices all across the USA. Artisan Partners provides services to pensions, trusts, endowments, foundations, charities, government entities, mutual funds etc. Artisan partners also managers client-focused equity and income portfolios.
Artisan Partners invests primarily into growth and value stocks no matter the market cap. Additionally, for their fixed income portfolio’s they invest in bonds and loans (debt).
Artisan has helped it clients and partners to generate $130B in wealth since their conception in 2008. This has translated into an average yearly compounding return of 14.63%. Today, Artisan partners has $162.9B of assets under their own management. Their assets under management (AUM) has a 3% yearly growth rate. This is important because as their AUM grows, their fees generate more and more revenue. Currently, Artisnas weighted average fees are 0.71%. Artisans management fees have helped them to generate revenues of $899.6M for the fiscal year 2020. This revenue has translated into an EBITDA of $459.8M, and a market cap of 4.4B.
Artisans revenue grew 43% from Q1 2020 to Q1 2021, and their operating expenses increased by only 28% during this same time. This indicated that Artisans profit margins have increased between 2020 and 2021, this is in fact correct as their operating margins grew from 35% (Q1 2020) to 41.9% (Q1 2021).
Artisan also distributes quarterly dividends to their investors, and over the last 4 quarters (Q1-Q4 2020) their dividend yield increase by 59% and they distributed a special dividend of $0.31/share. This indicates that Artisan is in good financial health and has more retained earnings than perhaps expected. This is a very good sign for investors, especially dividend/long-term investors.
Artisan Partners has a Depreciation growth rate of 5.75%, an interest expense decrease rate of 1.44%. Artian Partners capital expenditures have grown at a rate of 12.57%, and their gap in current assets to current liabilities (working capital) is growing at a rate of 11.98%. Lastly Artisn gets taxed at a rate of 16%. (All of these metrics will be used to assist the Discounted Cash Flow Model.)
For my Comps. Analysis (which will be seen later in the report), I outlined some colmparable companies to Artisan of similar market cap’s. These companies include Atlas Corporation ($ATCO), AllianceBernstein ($AB), Hamilton Lane Incorporated ($HLNE), Federated Hermes Incorporated ($FHI), Ares Capital Corporation ($ARCC) and Janus Henderson Group PLC ($JHG).
The asset management industry has been estimated to grow at a 9.6% CAGR until 2030, and is said to have a WACC of 9.3%. These metrics will be used to assist in the DCF model.
Investment Valuation and Plan:
The Discounted Cash Flow Model (linked as an image below), indicates that the fair value of Artisan’s stock ($APAM) is $72.08. This represents a 28.83% increase from the current share price ($55.95). The DCF model linked below has been condensed for optimal viewing and all of the years between 2021-2030 are included in the model.
Additionally, to support this valuation I made a Comps. Analysis, in which I compared Artisan to other competitors (as mentioned previously in the “competition” segment of this analysis). This Comps. Analysis (also linked below) indicates that Artissan is currently undervalued as it is valued in the 1st Quartile (bottom 25%) of similar companies. The 1st Quartile indicates a share price of $57.54 and a forward price of $55.2, currently the price is in between these two estimates, indicating that it is a good time to buy. The estimated fair value based on the comparables analysis (given that Artisan is valued at the industry average) is between $77.67 and $85.94. This is similar to the valuation that was derived from the DCF model.
With the support of the 2 models that I built, my price target for Artisan Partners ($APAM) is $75 (34.05% increase.)
An entrance into a position between the prices of $55.27 and $57.54 is a strong buy. I would look to enter around these prices and to exit at the $75 level as previously mentioned. If the share price falls between $55.27, I would look at if the price holds the $52.87 level. If this level holds it would generate a very strong buying opportunity. However, if the price does not hold this $52.87 level, I would wait for the stock ro drop to $40.30 before attempting to buy more shares.