$JHG: Looked appealing but quickly became very uninteresting due to non-recurring earnings and a pending merger
Janus Henderson Group (JHG) screens cheaply on the surface with a quote around $47 a share, a Price to Earning (P/E) of 9.9 and Price to Book value (P/B) of 1.56 but there is more to the story. There looms a pending acquisition by Trian and General Catalyst that was announced at the end of December in 2025 that values JHG at $49 per share. Most of the analysis covering this stock focus on the merger arbitrage angle but I am going to take a different approach. I am going to apply Benjamin Graham’s Enterprising Investor criteria to answer the question of whether the fundamentals justify the price?
***Spoiler: they don’t, but not for the reasons you may think!***
# What the Numbers Show
I’m going to walk through applying Graham’s criteria to each fundamental starting with the P/E and P/B. JHG definitely meets the threshold of less than 15x for P/E sitting around 9.9 (34% below) and marginally exceeds the P/B at 1.56 (cutoff is 1.5). The combined P/E \* P/B sits around 15 which is well below the blended 22.5 test. The current ratio sits at 4.18 which more than doubles the criteria of 2.0x and the earning growth is tremendous a whopping 119% over 10 years, far exceeding the 33% requirement.
At first glance the stock looks like a great buy but taking a closer look at the earnings begins to surface some cracks, the earnings quality in 2025 was inflated by non-recurring items and the Net Current Asset Value (NCAV) is only $10.69 per share. Following Graham’s criteria, we don’t pay more than two-thirds the NCAV (67 cents on the dollar) and right now the stock is trading nearly 4.5 times the NCAV because of the pending acquisition. This is far above Graham’s asset protection.
# Pulling Out the Magnifying Glass
As hinted above the earnings in 2025 need to be scrutinized they are heavily inflated by non-recurring items. JHG hit their performance fee bonuses across multiple funds for a whopping $389.6 million bump in earnings, this is exceptionally large by historical standards for JHG. As a Graham investor, I want repeatable earnings and this is certainly not repeatable. If you average this year out the cheap P/E begins to look much more expensive but let us continue on.
JHG also had a $137 million “profit” from a one-time reclassification. This isn’t profit though, it is an accounting entry. JHG operates globally and holds assets across multiple currencies, at some point in 2025 JHG reclassified certain foreign currency translation adjustments. In laymen’s terms they took something from the balance sheet and moved it to the income statement to boost earnings. No business activity generated this profit, which again makes this not repeatable.
With total earnings of $798 million and $526 million in non-recurring earnings, we can do some quick math to determine that **nearly two-thirds of JHG’s net income was not repeatable!** If you remove the $526 million in earnings from the equation you are left with $272 million in repeatable earnings which pushes the P/E to 27x its current price. This is not a Graham value stock, it’s fool’s gold.
The $0.59 Q1 2026 EPS corroborates my findings above. On top of this as we saw in the introduction the balance sheet is dominated by goodwill that eats away at the margin of safety and the dividends have been suspended for the duration of the merger agreement. JHG may be a well-managed company but they are not a value buy.
# The House Always Wins
The stock is heavily inflated due to the merger that is expected to close in the next few months. Trian Fund Management, the activist hedge fund led by Nelson Peltz, and General Catalyst, a prominent growth equity firm saw an undervalued business. However, at the current price this is a merger arbitrage trade not a value investment. With a limited upside of $49 a share the margin of safety is razor thin. Graham’s principle is to buy stock at a meaningful discount to intrinsic value, this isn’t trading at a meaningful discount to any value. If the deal falls through you will be stuck holding the stock that has suspended dividends and declining earnings.
# Cheap is Subjective!
JHG isn’t a bad business but at the current prices the margin of safety is non-existent. The “cheap” P/E isn’t sustainable and a tangible book value of around $6 a share provides no real asset protection. Suspending the dividend further goes against Graham’s income protection philosophy and the merger puts a hard ceiling on the upside. A true Graham opportunity requires repeatable earnings, asset backed downside protection, dividends and a price at a meaningful discount to intrinsic value.
If the stock price dropped to $15 a share this changes the calculus completely and I would consider adding JHG to my portfolio. Using the $272 million repeatable income as an EPS guide would drop the P/E to 8.4x. The book value is still slightly elevated at 2.4x the tangible value however I would be willing to overlook this because we are getting nearly a 70% discount on the acquisition price. I would be comfortable with that margin of safety.