VRTS

Virtus screens as statistically cheap — 7.0x trailing EPS, 1.1x sales, and a $937M market cap against $478M in cash and $934M of book equity — but the cheapness reflects a deteriorating core. FY2025 revenue fell 6.0% to $853M and operating income fell 7.6% to $169M; more importantly, MD&A discloses net outflows of $(18.9)B in 2025, worse than $(10.4)B in 2024, with total AUM down 8.9% to $159.5B despite a +16.4% S&P year. For an asset-based-fee business, persistent net outflows in a rising market are the most damning signal — fee revenue is being held up by beta, not by client trust, and the $5.9B of positive market performance only partly offset the bleed.

The quality of FY2025 earnings is also weaker than diluted EPS suggests. Diluted EPS rose 18.2% to $19.97, but that is largely a buyback artifact: net income actually fell 10.8% to $136M while shares outstanding dropped 3.9% (and $60.0M was spent repurchasing 347,364 shares in 2025). Operating cash flow swung to $(67.2)M from a small positive, long-term debt jumped 68% to $390M, and management is deploying capital aggressively into private markets — a 35% minority in Crescent Cove for $41.1M (Dec 15, 2025) and a pending majority stake in Keystone National Group for $200M cash plus up to $170M in earnouts (closing Q1 2026). That is a clear, sensible strategic pivot toward private credit where fees are stickier, but it is being funded with debt at the same time AUM is shrinking.