SEI Investments SEIC remains well-poised for growth on the back of its global presence, solid assets under management (AUM) balance, strategic acquisitions, and technological innovations. However, rising expenses and high exposure to fee-based revenues are headwinds.

Tailwinds for SEIC

Solid AUM & Expansion Efforts to Aid Revenue Growth: The steady improvement in SEIC’s revenues over the last several years is impressive. The metric witnessed a compound annual growth rate (CAGR) of 5.2% for the five years ended 2024. Over the same time frame, total AUM, advisement and administration recorded a CAGR of 8.2%. The company’s diversified products and revenue mix, a strong global presence through depository services in Luxembourg, and solid AUM balance reflect improving prospects.

Further, SEI Investments has been expanding through acquisitions. In December 2024, it acquired LifeYield to enhance multi-account tax management. Additionally, other buyouts such as Altigo to expand in the alternatives investment space and National Pensions Trust boost its position in the defined contribution market. These, along with several past buyouts, are expected to support top-line and AUM growth.

Our estimates for total revenues and total assets suggest a CAGR of 5.6% and 3.5%, respectively, by 2027.

Superior Technology: SEI Investments depends heavily on technology to support its operations. Its primary business platform, Investment Processing, delivers its outsourced software and processing services through TRUST 3000 and the SEI Wealth Platform (SWP). Revenues generated by these two are recognized under information processing and software servicing fees. Though the metric dipped in 2023, it witnessed a CAGR of 5.5% over the five years ended 2024.

Moreover, its strategic acquisitions, including Oranj's cloud-native technology platform, Finomial and Novus, aid its technological advancement efforts. Further, the company has been taking numerous initiatives to boost technology to aid advisors. These initiatives and constant innovations in software will likely help SEI Investments win new clients and thus support revenues. Our estimate for information processing and software servicing fees indicates a CAGR of 6.6% by 2027.

Solid Balance Sheet to Support Capital Distributions: As of Dec. 31, 2024, SEIC’s total debt was $51.2 million, significantly lower than cash and cash equivalents of $839.9 million. Robust liquidity and earnings strength enable the company to address its near-term debt obligations, even if economic turmoil occurs.

Further, the company’s capital distribution activities are encouraging. In December 2024, the company raised its semi-annual dividend by 6.5%, following a 7% hike in December 2023. The company also has a share repurchase plan in place. As of Dec. 31, 2024, roughly $169.6 million worth of authorization remained available.

A robust capital and balance sheet position along with debt/equity and dividend payout ratios lower than peers allows the company to keep its capital distributions sustainable.

In the past six months, shares of this Zacks Rank #3 (Hold) company have gained 19.3% compared with the industry’s rally of 12.8%.

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Headwinds for SEI Investments

Rising Expenses: Elevated expenses are likely to hurt SEI Investments’ bottom-line growth. Though total expenses declined in 2023, the metric witnessed a CAGR of 5.8% over the last five years (2019-2024). The rise was primarily due to higher compensation costs, and data processing and computer-related expenses.
 
Given that most of the company’s operations are technology-driven, such as the upgrade of proprietary software and the development of new ones, costs related to the same are expected to continue to rise . Also, the company expects inflationary pressure on personnel costs to continue in the quarters ahead. Our estimates for total expenses suggest a CAGR of 6.2% by 2027.

Significant Reliance on Fee-Based Revenues: Substantial exposure to fee-based revenues, mainly from asset management, administration, and distribution fees (which accounted for 78.9% of total revenues in 2024 and 2023 and 76% in 2022), is likely to weigh on the company’s financials in the near term as fluctuations in markets and foreign exchange translations and/or regulatory changes may hamper AUM growth. For 2025, we expect asset management, administration, and distribution fees to contribute 78.5% to total revenues.

SEIC’s Peer Stocks Worth Considering

A couple of better-ranked stocks from the investment management space are Patria Investments Limited PAX and PennantPark Floating Rate Capital Ltd. PFLT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for PAX’s 2025 earnings has been revised 1.4% upward over the past month. Its shares have gained 1.4% in the past six months.

The consensus estimate for PFLT's 2025 earnings has been revised 4.7% upward over the past 30 days. In the past six months, the company’s shares have gained 1.2%.

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SEI Investments Company (SEIC) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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