Victory Capital Holdings Inc (NASDAQ:VCTR) Emerges as a Top Value Pick with Strong Fundamentals and Undervalued Potential

Victory Capital Holdings Inc (NASDAQ:VCTR) has been recognized as a possible choice for value investors after a screening process that focuses on stocks with solid fundamentals and appealing prices. The screening method selects companies with a ChartMill Valuation Rating higher than 7, confirming they seem priced below their true value while also showing good profitability, financial stability, and growth potential. This matches the ideas of value investing, where investors look for stocks trading below their estimated fair value, backed by strong financial measures that lower risk.

Key Fundamentals Highlighting VCTR as an Undervalued Stock

1. Valuation: Reasonable Pricing Compared to Earnings and Growth

The stock’s Valuation Rating of 7 implies it is fairly priced based on its fundamentals. Important measures include:

• P/E Ratio of 14.14, lower than the S&P 500 average (26.73), showing a discount compared to the broader market.
• Forward P/E of 10.46, more affordable than 70.89% of its Capital Markets industry peers, supporting its undervaluation.
• Enterprise Value/EBITDA ranks VCTR in the top 14% of its sector for affordability, suggesting a potential safety margin.

For value investors, these measures are essential—they help spot stocks where the market may not fully account for the company’s earnings or future cash flow.

2. Profitability: High and Rising Margins

With a Profitability Rating of 9, VCTR shows strong earnings performance:

• Return on Equity (ROE) of 25.76% beats 93.25% of industry peers, showing efficient use of capital.
• Operating Margin of 49.21% is much higher than the sector average, indicating strong operational efficiency.
• Steady Earnings Growth: EPS has increased at an annual rate of 12.55% over the past five years, with faster growth expected (16.43% in the coming years).

High profitability is a key part of value investing, as it suggests a company can maintain and grow returns over time, even if temporarily undervalued.

3. Financial Health: Low Risk and Balanced Debt

VCTR’s Health Rating of 7 reflects a stable financial position:

• Altman-Z Score of 3.47 shows low bankruptcy risk, better than 78.9% of competitors.
• Debt-to-FCF Ratio of 2.76 means the company could pay off its debt in less than three years using free cash flow—a sign of financial strength.
• While the Debt/Equity Ratio of 0.84 is average, it aligns with industry standards.

Financial stability is crucial for value investors, as it lowers the chance of long-term losses—a major concern when holding undervalued stocks.

4. Growth: Steady Future Expansion

Despite its value focus, VCTR holds a Growth Rating of 6, with positive trends:

• Revenue Growth: Expected to rise to 19.94% yearly, up from a 7.85% historical average.
• EPS Growth: Projected at 16.43%, supported by better margins and operational efficiency.

Growth is sometimes ignored in value investing, but steady expansion helps narrow the gap between market price and true value over time.

Why This Is Important for Value Investors

Value investing relies on buying quality businesses at a discount to their real worth. VCTR’s mix of low valuation multiples, high profitability, and solid financials fits this approach. The stock’s growth potential also reduces the risk of a "value trap," where a low-priced stock fails to rise due to weak fundamentals.

For investors looking for similar opportunities, more undervalued stocks can be found using the Decent Value Stocks screener.

Disclaimer: This analysis is not investment advice. Investors should do their own research or consult a financial advisor before making decisions.