T. Rowe Price Group, Inc. TROW shares touched a new 52-week low of $97.26 during yesterday’s trading session. Over the past year, the stock has declined 10.6%, underperforming the industry and the S&P 500 index. Meanwhile, the TROW stock has fared worse than its peers Artisan Partners Asset Management APAM and Affiliated Managers Group’s AMG growth of 4% and 0.5%, respectively.

Price Performance

Image Source: Zacks Investment Research

Weakness in TROW’s share price coincides with the broader industry trend reflecting investors’ concern over shifting economic conditions, stringent regulations and rising compliance costs, which have impacted asset managers like APAM, AMG and TROW.

Other Headwinds for TROW 

Rising Expenses: T. Rowe Price’s expenses escalated, seeing a four-year (ended 2024) CAGR of 8.3%. The company incurs significant expenditure to attract investment advisory clients and additional investments from existing clients. Also, it invests substantially to upgrade technology to align with changing customer needs, leading to increased expenses.

Total Expenses Trend

Image Source: Zacks Investment Research

Overdependence on Advisory Fees: Investment advisory fees are the biggest sources of revenues for TROW, comprising 90.2% of its net revenues as of Dec. 31, 2024. The increased dependence on these could affect the company's top line in the near term as changes in the AUM due to market fluctuations and foreign exchange translations, regulatory changes, or a sudden slowdown in overall business activities could hurt this revenue source.

What Supports TROW Stock

Despite the above-mentioned challenges, the company maintains strong fundamentals. 

Revenue Strength: Organic growth has been a key strength for T. Rowe Price, as reflected by its revenue growth story. Net revenues saw a four-year (ended 2024) CAGR of 3.4%. The company’s focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings will support revenue growth. The company's shifting focus toward international growth funds is also expected to help increase its revenues and investment management margin.

Revenue Trend

Image Source: Zacks Investment Research

Rising AUM:  TROW’s diverse business model ensures sustainable earnings. Accordingly, the company’s diversified AUM across various asset classes, client bases and geographies offers support. Its AUM balance witnessed a CAGR of 2.3% over the past four years (2020-2024). Also, for the five years ended Dec. 31, 2024, 59% of T. Rowe Price U.S. mutual funds AUM outperformed the Morningstar median, whereas 48% outperformed the passive peer median. A strong brand, consistent investment track record, and decent business volumes are expected to keep supporting AUM growth in the upcoming period.

Solid Liquidity:  T. Rowe Price exhibits a strong liquidity position. It had liquid assets of $5.65 billion (including cash and cash equivalents, as well as investments) compared with total liabilities of $2.02 billion as of Dec. 31, 2024.

Impressive Capital Distribution:  A higher level of liquid assets in the company aids in impressive capital distribution activities.

T. Rowe Price has hiked quarterly dividends every year since its IPO in 1986, the most recent being a sequential hike of 2.4% in February 2025 to $1.27 per share. In the past five years, TROW raised its dividend six times, with an annualized dividend growth rate of 7.6%. Considering the last day’s closing price of $100.66, the company’s dividend yield currently stands at 4.93%.

T. Rowe Price Group, Inc. Dividend Yield (TTM)

The company also has a share repurchase plan. In March 2020, the board of directors approved a repurchase plan of 24.1 million shares. In December 2020, the board increased the plan by nearly 15 million shares, bringing the total authorization to 39.1 million shares. As of Dec. 31, 2024, 18.4 million shares remained under authorization. 

Given TROW’s solid liquidity position and a favorable debt-to-equity position compared with the industry average, its capital distribution activities seem sustainable.

Strong Leverage: T. Rowe Price’s debt/equity ratio is 0.00 compared with the industry average of 0.12, displaying no debt burden relative to the industry. This highlights the financial stability of the company, even in an unstable economic environment.

Should You Buy TROW Stock Now

T. Rowe Price will likely perform well in the long run, given its strong fundamentals and efforts to expand its business operations on the back of inorganic activities. The company’s plans for a partnership with Aspida highlight its continued commitment to the expansion of the insurance business and to delivering innovative investment opportunities for its clients. Also, a strong liquidity position will aid capital distribution activities.

However, market uncertainty and rising expenses, along with regulatory pressure, are near-term concerns.

Thus, the TROW stock is a cautious bet for investors at the moment. Those who own the stock can hold it now for healthy long-term returns. TROW currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report

Affiliated Managers Group, Inc. (AMG) : Free Stock Analysis Report

Artisan Partners Asset Management Inc. (APAM) : Free Stock Analysis Report

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

Zacks Investment Research