How The Big QQQ Shift Is Powering Invesco Stock
Investment manager Invesco’s stock (NYSE:IVZ) surged nearly 15% in Friday’s trading. The rally came as the company filed a proxy statement seeking shareholder approval to restructure the Invesco QQQ Trust which has over $355 billion in assets and is one of the most popular and heavily traded ETFs in the world. The proposed change would convert QQQ from a unit investment trust to an open-ended fund, marking a technical but significant shift. At a 0.2% expense ratio, the fund generates over $700 million in annual fees, the bulk of which currently goes to the fund’s trustee, BNY Mellon, and index provider Nasdaq, with the remainder used for marketing.
As the sponsor, Invesco earns little under the current structure but this is likely to change meaningfully if the proposal is approved. For perspective, Barclays estimates the reclassification might add about $140 million in incremental revenues with a bulk of this being pure profit for the company. Investors could benefit as well, with the open-ended structure enabling greater tax efficiency and better index tracking.
Image by Markus Winkler from Pixabay
So is the stock a buy at its current price of around $20 per share currently? While the new developments will likely add a sizable new profit stream for the company, there are some concerns with IVZ stock. We arrive at our conclusion by comparing the current valuation of IVZ stock with its operating performance over the recent years as well as its current and historical financial condition. Our analysis of Invesco along key parameters of Growth, Profitability, Financial Stability, and Downturn Resilience shows that the company has a weak operating performance and financial condition, as detailed below. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.
How Does Invesco’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, IVZ stock looks cheap compared to the broader market.
• Invesco has a price-to-sales (P/S) ratio of 1.3 vs. a figure of 3.1 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 7.2 compared to 20.9 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 9.7 vs. the benchmark’s 26.9
How Have Invesco’s Revenues Grown Over Recent Years?
Invesco’s Revenues have grown marginally over recent years.
• Invesco has seen its top line decline at an average rate of 3.3% over the last 3 years (vs. increase of 5.5% for S&P 500)
• Its revenues have grown 6.0% from $5.8 Bil to $6.1 Bil in the last 12 months (vs. growth of 5.5% for S&P 500)
• Also, its quarterly revenues grew 3.7% to $1.5 Bil in the most recent quarter from $1.5 Bil a year ago (vs. 4.8% improvement for S&P 500)
How Profitable Is Invesco?
Invesco’s profit margins are worse than most companies in the Trefis coverage universe.
• Invesco’s Operating Income over the last four quarters was $896 Mil, which represents a poor Operating Margin of 14.6%
• For the last four-quarter period, IVZ Net Income was $804 Mil – indicating a moderate Net Income Margin of 13.1% (vs. 11.6% for S&P 500)
How Resilient Is IVZ Stock During A Downturn?
IVZ stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
• IVZ stock fell 57.3% from a high of $29.33 on 3 June 2021 to $12.52 on 23 October 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $19.92 on 18 July 2025
Covid Pandemic (2020)
• IVZ stock fell 64.5% from a high of $18.89 on 11 February 2020 to $6.70 on 15 May 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 11 January 2021
Global Financial Crisis (2008)
• IVZ stock fell 72.4% from a high of $32.00 on 21 December 2007 to $8.84 on 20 November 2008, vs. a peak-to-trough decline of 56.8% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 3 May 2013
Putting All The Pieces Together: What It Means For IVZ Stock
Hence, despite its low valuation and potential for profit growth, we think that the stock remains a tricky buy due to its slow growth and weak downturn resilience. While you would do well to be cautious about IVZ stock for now, you could explore the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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