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Why I think Janus Henderson shares are in the buy zone

The Janus Henderson Group PLC (ASX: JHG) share price is down 3.5% in 2019 so far. I think it’s the right time to buy.

Background on Janus Henderson Group

Janus Henderson is an asset management company listed on the ASX and the NYSE. It is the holding company of investment management group Henderson Global Investors. The group provides investment management services in Europe, North America, Asia, Australia, Africa and the Middle East. The group had around $371 billion of assets under management at the end of 2018.

Why I think it’s a buy

Janus Henderson has a price-to-earnings (P/E) ratio of just 7.64x against the ASX 200, which has a P/E ratio of 17.81x at the time of writing. This low valuation makes Janus Henderson Group a bargain. Additionally, while earnings for 2018 were down on 2017, they were up on previous years. So far in 2019, earnings are slightly lower than 2018 with the company reporting for the calendar year; however, this should not be a major concern given the low valuation.

The group offers a dividend yield of 7.2%, which can be considered a great return at current interest rates of 1%. Dividends in 2019 have been slightly lower than 2018, which is prudent given that earnings are slightly down. The group also has a low payout ratio so has plenty of scope to return more of its profits to shareholders. Indeed, it is currently buying back shares, a good sign of financial health and a willingness by its management to return funds to investors.

Another important valuation metric is the price-to-book ratio, which places Janus Henderson Group on a value of 0.8. This is against the ASX 200, which has a price-to-book ratio of 2.2 at the time of writing, pointing to the conclusion that Janus Henderson Group is a great value pick.

The group has a low debt-to-equity ratio of 6.6% with cash and investments outsizing debt 4x. This suggests that the company is in great health as it keeps a liquid balance sheet. Undoubtedly management would also like to keep the cash balance of the company high as they find investment opportunities for the fund manager to invest in with its own cash.

Foolish takeaway 

Janus Henderson Group trades on a low P/E multiple and a high dividend yield. It has a healthy balance sheet and the company is buying back stock. I think it’s a buy.

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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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.