AAMI

Acadian is a real, profitable investment-advisory franchise, and the top line is doing its job: FY2025 revenue of $564M grew 11.5% YoY, the fourth straight year of gains ($417M→$427M→$506M→$564M). The problem is that none of that growth is reaching the bottom line. Net income fell 5.9% to $80.0M, operating income slipped 2.5% to $132M, and diluted EPS was essentially flat at $2.21 (-0.5%) — and that flatness was only achieved because the share count shrank 4.7% to 35.7M via buybacks. Revenue up double digits while profit declines is textbook margin compression (net margin is now just 14.2%), the opposite of the operating leverage you want to underwrite a premium multiple.

And the multiple is premium. At $71.17 the stock trades at 32.2x trailing EPS and 4.5x sales — rich in absolute terms and very rich for an asset manager, a business model that is inherently AUM- and market-beta-driven and that the market typically values in the low-to-mid teens. You are paying a growth-stock price for a company whose earnings are going backwards. The headline 199% ROE is a mirage: it sits on a sliver of equity (the only equity figure provided is FY2023's $40.2M) against a balance sheet levered 14.75x liabilities-to-equity, so the ratio reflects thin book value, not exceptional capital efficiency.