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Tuesday, November 22, 2011

Is Janus Undervalued?

News summary by MFWire's editors

It's been a painful year for Janus Capital Group [see profile] and many other equity-focused mutual fund firms, but have the markets punished the Denver-based asset manager's shares too much? Value investing blogger Frank Voisin makes the case for Janus, a fallen high-flying growth manager from the 90s, actually being a worthy target for value investors.

Voisin notes that by November 1, Janus' share price had fallen 49.2 percent year-to-date. The decline came thanks to a $32.5-billion drop in assets management, including $8.2 billion in long-term net outflows. Yet, he sees value. Janus has "a free cash flow yield of a whopping 19.3 percent" and had averaged $236 million in free cash flow per year for the past decade. And Voisin takes heart in the $513 million, 46 percent of the total, of debt Janus has repaid over the past 2.5 years.

"It appears that the company is quite cheap," Voisin writes. "The market seems focused on the wrong metric (overall change in AUM) when a better metric for predicting long-term earnings (net investor inflows) exists that shows a much more mild scenario than that which first appears. Additionally, in focusing on the wrong thing, the shares have taken a beating." 

Edited by: Neil Anderson, Managing Editor

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