This ASX 200 underdog is fighting back with a strong profit result

This stock is outperforming its peers and the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index today as its full-year results and dividend were better than many had feared.

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Dire predictions for Pendal Group Ltd's (ASX: PDL) share price seem premature with the stock staging a big rebound today after the release of its full-year profit results.

The stock rallied 3.5% to $8.50 and is the best performing listed fund manager on the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index today as Magellan Financial Group Ltd (ASX: MFG), Platinum Asset Management Limited (ASX: PTM) and Perpetual Limited (ASX: PPT) shares gained 1%-2% each.

Pendal posted a 17% jump in cash net profit to $201.6 million that's driven by a 44% uplift in performance fees. The average funds under management (FUM) increased by 10% to $99.5 billion.

The thing that may have excited investors more is the better than expected final dividend of 30 cents a share, which takes its full-year dividend to 52 cents a share – or 16% above FY17.

The company's outlook statement may also have been more upbeat than what some sceptics were predicting even as management acknowledged that the increased market volatility could impact on its investment performance.

"We remain confident that our high conviction, investment-performance-led approach will continue to resonate with our clients in the years ahead," said Pendal's chief executive Emilio Gonzalez.

"As interest rates rise and the global cost of capital resets, we believe the role of active managers as discriminating stewards of capital, will become more, not less, important."

There had been worries that consensus forecasts were too high and that today's results would prompt analysts to downgrade earnings expectations on the stock by around 10% (click here to find out why).

But there was nothing in the outlook statement to suggest that market expectations had been set too high and I don't think brokers will be making any significant changes to their forecast on the stock – at least not based on this announcement.

This isn't to say that Pendal is immune from earnings downgrades in the short-term although the stock's 25% crash since January this year suggests that quite a bit of bad news is already in its share price.

The stock is trading on an FY19 consensus price-earnings (P/E) multiple of a little over 13 times and this is at the bottom of its P/E range over the past five years.

In spite of its valuation, the stock isn't a screaming buy in my books as I can't see a near-term catalyst for the stock.

If you are looking for large-cap shares that are better placed to outperform in 2019, the experts at the Motley Fool may have better alternatives for you.

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Motley Fool contributor Brendon Lau owns shares of Magellan Financial Group. The Motley Fool Australia owns shares of Platinum Investment Management Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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