• If you are wondering whether Artisan Partners Asset Management at US$43.81 offers fair value or a potential bargain, this article walks through what the current price may imply.
• The stock has returned 2.3% over the last 7 days, 4.8% over the last 30 days, 5.8% year to date and 6.8% over the last year, with 3 year and 5 year returns of 49.7% and 29.6% respectively.
• Recent attention on asset managers, including Artisan Partners Asset Management, has centered on how they are positioned for shifts in investor preferences and fund flows. This context helps frame how the market is currently thinking about the business and what investors might be pricing into the shares.
• On our valuation checklist, Artisan Partners Asset Management scores 4 out of 6. Next we will look at what different valuation methods suggest about that score, before closing with a more complete way to think about value that goes beyond a single metric.

Approach 1: Artisan Partners Asset Management Excess Returns Analysis

The Excess Returns model asks a simple question: are shareholders earning more on the company’s equity than they are requiring as a return, and how long might that gap persist? For Artisan Partners Asset Management, the model uses an average return on equity of 53.69% and a stable book value of $4.73 per share, both based on median figures from the past 5 years.

On this foundation, the model estimates stable earnings of $2.54 per share, a cost of equity of $0.39 per share, and an excess return of $2.15 per share. Put plainly, the company is modeled as generating earnings above the return that equity holders are assumed to require on its capital base.

When these excess returns are projected forward and discounted, the model arrives at an intrinsic value of about $47.84 per share. Compared with the recent share price of $43.81, this implies the stock is around 8.4% undervalued, which is a relatively small gap that points to pricing that is close to the model’s estimate of fair value.

Result: ABOUT RIGHT

Artisan Partners Asset Management is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: Artisan Partners Asset Management Price vs Earnings

For a profitable company like Artisan Partners Asset Management, the P/E ratio is a straightforward way to link what you pay per share to the earnings that support that price. It is popular because it directly connects the stock price to the bottom line that ultimately matters to shareholders.

What counts as a "fair" P/E depends on how the market views a company’s growth potential and risk. Higher expected growth or lower perceived risk can support a higher multiple, while slower growth or higher risk usually points to a lower one.

Artisan Partners Asset Management currently trades on a P/E of 12.72x. That sits below the Capital Markets industry average P/E of 24.07x and below the peer group average of 15.13x. Simply Wall St’s Fair Ratio for the stock is 14.66x, which is a proprietary estimate of what the P/E could be given factors such as earnings profile, industry, profit margin, market cap and risk characteristics.

The Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for company specific traits rather than assuming all Capital Markets firms deserve the same multiple. With the current P/E of 12.72x versus a Fair Ratio of 14.66x, the shares appear undervalued on this metric.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1424 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Artisan Partners Asset Management Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company, tied directly to your assumptions for fair value, future revenue, earnings and margins.

A Narrative connects what you believe about a business to a financial forecast and then to an estimated fair value, so you can see how your view translates into numbers rather than relying only on headline ratios.

On Simply Wall St, within the Community page used by millions of investors, Narratives are presented as an easy tool where you can compare your fair value to the current price and use that gap to help decide whether a stock might suit a buy, hold or sell decision for you.

These Narratives update automatically when new information such as earnings releases or news is added, and for Artisan Partners Asset Management you might see one investor expecting a relatively high fair value based on optimistic assumptions, while another assigns a much lower value based on more cautious expectations.

Do you think there's more to the story for Artisan Partners Asset Management? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.