Pinnacle Investment Management Ltd (ASX: PNI) is set to release its FY25 earnings result tomorrow. Investors may be wondering whether to buy Pinnacle Investment Management shares ahead of that release.
With valuations of the big 4 banks looking stretched, investors may be looking to other companies in the ASX financials sector.
Pinnacle Investment Management is a multi-affiliate investment management firm. It holds minority equity interests in specialist investment managers, and provides them with infrastructure and distribution support.
Over the past 5 years, Pinnacle has climbed an impressive 336%.
Its performance over the past year is also commendable, rising 28%.
Investors may be wondering whether this ASX 200 financials stock has further to rise or is fully priced ahead of its result.
Let's see what one leading expert had to say.
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Macquarie rates Pinnacle a top pick
Last month, Macquarie Group Ltd (ASX: MQG) named Pinnacle Investment Management in its SMID-Cap Best Picks July.
That report revealed the broker's top picks in the small and mid-capitalisation space.
With a market capitalisation of approximately $5 billion, Pinnacle classifies as a mid-capitalisation stock.
Last month, Macquarie placed an 'outperform' rating on Pinnacle Investment Management shares, and a price target of $25.10.
Given that Pinnacle Investment Management shares closed at $22 on Friday, this suggests 14% upside from here over the next 12 months (excluding dividends).
When issuing this recommendation, the broker said:
We believe PNI has an attractive organic growth outlook and potential to add accretive M&A. Outlook for organic performance is backed by net flows, performance fees and operating leverage. We do not reflect future M&A in our earnings forecasts.
Earnings result preview
Macquarie also noted that the earnings growth outlook remains central to its view on Pinnacle Investment Management shares.
The broker is forecasting earnings per share to growth at a compound annual growth rate (CAGR) of 25% between FY24 and FY27. That compares to 31% CAGR earnings growth between FY16 and FY24.
Macquarie expects future earnings growth to be driven by funds under management (FUM) growth, as well as operating leverage.
As of March 2025, FUM stood at $160 billion.
The broker also noted that operating leverage declined between 2022 and 2024, as a number of affiliates invested in new strategies. Specifically from 54% to 34%.
However, Macquarie expects margins will return close to 50% in the medium term and exceed 50% over the long term, as investments turn increasingly profitable.
Should I buy Pinnacle before or after its earnings result?
Based on Macquarie's price target, Pinnacle Investment Management shares are a buy today. The broker's price target is 14% above the current share price. When including both capital growth and dividends (based on the current dividend yield of 2.70%), investors can expect a total return of nearly 17% over the next 12 months.
Broker Ord Minnett also has a buy rating on Pinnacle, and recently increased its price target by 5% to $26.10.
However, it's worth noting that earnings season can be unpredictable. Share price reactions are not always consistent with the underlying results. When Pinnacle reported its half-year result earlier this year, its share price fell 14%, despite exceeding analyst expectations by double digits and outlining a multi-year growth trajectory.
Therefore, according to at least two top brokers, Pinnacle Investment Management shares are a buy ahead of its earnings result. However, should history repeat itself, investors may get another chance at buying this high-quality company at a lower share price in the future.
