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Envestnet (ENV) Rides on Recurring Revenue Strength, Debt Ails

Envestnet, Inc. ENV is currently benefiting from a strong asset-based and subscription-based recurring-revenue generation capacity.

The company recently reported third-quarter 2021 adjusted earnings per share of 61 cents that outpaced the Zacks Consensus Estimate by 3.4% but declined 15.3% year over year. Revenues of $303.1 million surpassed the consensus mark by 0.7% and climbed 20% year over year.

Envestnet’s shares have gained 25.7% over the past six months against 19.8% decline of the industry it belongs to.

How is Envestnet Doing?

Envestnet’s business model ensures solid asset-based and subscription-based recurring-revenue generation capacity. The company provides asset-based and subscription-based services on a business-to-business-to-consumer basis to financial services clients. These clients offer solutions based on Envestnet’s platform to their end users. On a business-to-business basis, the company delivers an open platform to customers and third-party developers through an open API framework. Notably, asset-based recurring revenues of $184 million increased 34% and subscription-based recurring revenues of $113.6 million were up 5% in the third quarter of 2021.

The company’s technology-enabled services are expected to register handsome growth as trends such as increasing demand for personalized wealth management services and cost-effective guided advice are creating significant market opportunities.

Envestnet continues to focus on technology development to improve operational efficiency, increase market competitiveness, address regulatory demands and cater to client-driven requests for new capabilities. The company’s technology design facilitates significant scalability.

Some Risks

Envestnet's cash and cash equivalent balance of $394 million at the end of the third quarter was well below the long-term debt level of $848 million. This underscores that the company doesn’t have enough cash to meet this debt burden.

Zacks Rank and Stocks to Consider

Envestnet currently sports a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Business Services sector are Avis Budget CAR, sporting a Zacks Rank #1, and Charles River Associates CRAI and Alliance Data Systems ADS, each carrying a Zacks Rank #2 (Buy).

Avis Budget has an expected earnings growth rate of 398.1% for the current year. The company has a trailing four-quarter earnings surprise of 76.9%, on average.

Avis Budget’s shares have surged 669.1% in the past year. The company has a long-term earnings growth of 27.5%.

Charles River Associates has an expected earnings growth rate of 61.2% for the current year. The company has a trailing four-quarter earnings surprise of 51%, on average.

Charles River’s shares have surged 117.6% in the past year. The company has a long-term earnings growth of 15.5%.

Alliance Data has an expected earnings growth rate of 93.6% for the current year. The company has a trailing four-quarter earnings surprise of 52.9%, on average.

Alliance Data’s shares have surged 13.4% in the past year. The company has a long-term earnings growth of 13.4%.


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Envestnet, Inc (ENV): Free Stock Analysis Report
 
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