Abrdn Plc (LSE:ABDN) shares are traded on the London Stock Exchange in the United Kingdom. But despite being a member of the FTSE 100 index, this business hasn’t exactly been a stellar performer.

In the last 12 months, the Abrdn stock price has plunged by 40%, and over the past five years, it hasn’t faired much better, falling by 70%! By comparison, the FTSE 100 remained flat during this period delivering far superior performance.

But has this bearish trend created the perfect buying opportunity for my portfolio? Let’s take a closer look at this business to try and discover whether Abrdn shares are a good investment.

What does Abrdn do?

As a quick reminder, Abrdn is a global investment company with its headquarters in Edinburgh, Scotland. It originally operated under the name Standard Life Aberdeen Plc. The group renders a collection of financial services through three primary segments:

• Investment – Provides investment products & solutions for institutional, wholesale, and insurance clients.
• Advisor – Provides technology and tools to assist financial advisors and wealth managers in handling their clients.
• Personal – Provides financial planning services, as well as digital and discretional fund management solutions.

Across all of its divisions, Abrdn employs over 5,000 people worldwide.

What is Abrdn’s financial position?

Being an investment business, its performance is ultimately tied to the global economy. And recently, things haven’t exactly been going smoothly.

A lot of its revenue is generated through fees. And looking at the latest results, income from fees has decreased by 8% to £696m courtesy of the ongoing stock market correction. This has subsequently translated into adjusted profits tumbling to £115m.

To make matters worse, the £24.4bn withdrawal of the LBG tranche pushed total net capital outflow to £35.9bn. Consequently, total assets under management now stand at £580bn. Obviously, that’s a lot of money. But compared to pre-2022 levels, it’s significantly less.

All this goes to show how much of an impact a downturn in the stock market can have on Abrdn shares. But as a long-term investor, these periods of increased volatility are ultimately short-term problems. So, can the Abrdn share price recover in the long run?

What is the future of Abrdn shares?

As of today, Abrdn has a market capitalisation of just over £3bn. With the recent volatility, its 52-week range stands at 140.85p on the low end and 265.30p on the high end. Given the Abrdn share price is currently at around 144p, the business is trading close to its lowest point in the last year.

So, is this a buying opportunity?

Looking at the P/E ratio, it would certainly seem so. After all, the stock is only trading at 5.1 times earnings. By comparison, the market average is usually around 10-15 times. Yet, not everyone seems convinced.

While broker forecasts have placed an average target price of 168p, analyst consensus seems to lean towards hold/sell recommendations. With low levels of investor confidence in the stock market, this opinion isn’t surprising.

Having said that, there are reasons to be optimistic, in my opinion. Management seems to have a knack for executing value-adding acquisitions. For example, the buyout of Interactive Investors arguably transformed the company’s position in the UK wealth market.

Apart from adding an additional 400,000 customers to its roster, the deal has far exceeded expectations, further diversifying its revenue stream.

Once investor confidence returns to the stock market, fee-based revenue will likely come back in a slow but steady fashion. Providing no hiccups occur along the way, today’s seemingly cheap valuation could be a buying opportunity for patient investors. Yet, there is the risk of further share price decline, especially if a recession occurs.

Risks to Consider

While the low valuation looks like a bargain, I’m not blind to certain risks. As I previously mentioned, the nature of this business makes it heavily exposed to the fluctuations of the global economy.

As such, the revenue stream and, in turn, cash flow can become quite unstable, especially during times of heightened volatility. And this threat is only exacerbated by large movements in foreign exchange rates.

Something else to consider is the nature of the business. Operating in the regulated financial services sector comes with a lot of headaches. And failing to comply with regulatory restrictions can land the company into a heap of trouble both financially and legally speaking.

Is it good to invest in Abrdn shares?

Generally, investors like to check how much of the company is owned by insiders, institutions and the general public. This is because a fairly high level of institutional ownership shows a certain level of credibility. And if insiders are buying, then it typically signals faith in the firm’s long-term potential.

Today, institutional investors own approximately 50% of the shares outstanding. That, to me, signals strong backing from the professional side of the investment community.

What about insiders? Sadly, insider ownership is currently less than 1% which doesn’t exactly signal much faith. But it’s worth noting that this is a multi-billion-pound enterprise which can make retaining high levels of insider ownership challenging.

Despite all the latest turmoil, Abrdn shares are still backed by seemingly solid fundamentals. The group has just under £1.5bn in cash and £707m in total debt. Additionally, the latter has been falling consistently over the last five years.

Pairing this with a recently launched £300m share buyback programme and an undisrupted dividend policy, I personally believe that Abrdn shares are a good investment for my portfolio.

Prosper Ambaka does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.