SEI Investments, fintech with potential

SEI Investments is an American fintech company that is listed on the NASDAQ. Its business consists in developing software that helps optimize the decision making in the different stages of financial consultancy. There are different business areas in the company, which are basically classified into the following:

  • Investment processing: Its main clients in this business area are banks, asset managers, trust companies, financial advisors and in general companies involved in financial asset management. Its star products are the SEI Wealth Platform (SWP) and the Trust 3000. They are both platforms that enable the user to control the whole transaction process, that is to say, from the necessary bookkeeping involved, to presenting the projects to the client. SWP focuses more on asset management companies, while Trust 3000 is designed for trust companies. Thanks to these two platforms SEI has positioned itself as a leading international supplier of investment processing platforms.
  • Investment management: SEI supplies different products or financial portfolios managed by them. It has a wide range of products, which means that it can come up with an investment strategy that has been specifically adapted to each client according to their objectives and risk tolerance. It also supplies services such as investment strategies, consultancy and administrative services and other technological tools that enable financial institutions to optimize their consultancy work services.
  • Investment transactions: Finally, SEI has outsourcing business processing platforms where investment, administrative, conciliation and regulatory compliance accounting services are rendered, along with investor services and report writing for clients. The quality of these platforms and the variety of the services that are available have all contributed to its position as an international leader in the supply of this type of platform.

With regard to the business segments the company differentiates them according to the type of client: Private banks (28% of the total revenue), financial advisors (24% of the total revenue), financial institutions (20%), finance directors (27%) and investment in new businesses (1%). As we can see, the company is well-diversified; it covers almost all of the financial sector and without having to depend on any specific branch, seeing as the contributions from each type of client that go towards the total revenue are well-balanced. Geographically speaking it is diversified too, it operates in the United States, Canada, the United Kingdom, continental Europe, South Africa and East Asia, and it currently has a total of almost 11,300 clients.

This company has an excellent positioning in its sector, as aforementioned, it is a leader in two of its three business areas. This is basically thanks to the company investing continually in R+D, which enables it to constantly optimize its different platforms and therefore increase the existing barriers to entry, which gives it a significant competitive advantage.

The soundness of its business model, its leading position and its competitive advantages are conveyed very well in the figures of the company. If we have a look at its results we see how the company’s revenue has increased by 25% and its net profits by 50% in the last few years. In the last 10 years its sales and profits have grown non-stop.  

It currently has an operating margin of close to 28% while the 5 year average is 27%. The same applies to the ROE, which is above its 5 year average levels, and it is now 30% while the average is around 28%.

We think that it is a very interesting company that has demonstrated its ability to adapt to changes for more than 50 years and grow, with margins and ratios that are well above those of its competitors. The company has a net cash flow of almost 900 million dollars with no debt, which means that it is going to breeze through the next few months of economic inactivity.The company has established an excellent track record on the stock market in the past year, which has been cut short abruptly due to the current crisis with plummets of almost 50%. Although its income statement will logically be affected by the steep drops in the markets that have an impact on the assets managed by the company, the existing prices are on par with those recorded at the beginning of 2016.

Sergio Serrano – Partner and Financial Manager

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