T. Rowe Price currently trades at $106.17 per share and has shown little upside over the past six months, posting a middling return of 1.4%. The stock also fell short of the S&P 500’s 7.8% gain during that period.
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Why Is T. Rowe Price Not Exciting?
We don’t have much confidence in T. Rowe Price. Here are two reasons you should be careful with TROW, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Unfortunately, T. Rowe Price’s 2.6% annualized revenue growth over the last five years was sluggish. This was below our standards.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for T. Rowe Price, its EPS declined by 1.4% annually over the last five years while its revenue grew by 2.6%. 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. With its shares lagging the market recently, the stock trades at 11.4× forward P/E (or $106.17 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re fairly confident there are better investments elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than T. Rowe Price
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