The consumer finance market is poised for considerable growth, fueled by increased easily accessible digital financial offerings and escalating demand for financial services.
Given this backdrop, investors could consider adding consumer finance stocks such as Nomura Holdings, Inc. (NMR), WEX Inc. (WEX), and ORIX Corporation (IX) to their watchlist, given their solid growth potential.
Consumer financial services cater to the needs of businesses, individuals, and institutions by providing them with loans, insurance, wealth management services, credit cards, tax accounting, etc.
The industry is majorly driven by the rising affluence of high-net-worth individuals (HNIs), which drives demand for insurance, loans, homeownership, and mortgage activities. Moreover, rising consumer disposable incomes and the need for seamless and personalized financial products and services are driving the growth of the consumer finance sector.
Furthermore, the transition from traditional loan systems to digital payment platforms has made loans and credits easily accessible for both lenders and borrowers, adding to the growth of the consumer finance market. Consequently, the global consumer finance market is expected to reach $1.96 trillion by 2029, growing at a CAGR of 7.1%.
Additionally, with the increasing adoption of digital technologies like artificial intelligence, blockchain, the Internet of Things (IoT), and big data analytics, financial companies are improving how they conduct business and make data-driven decisions, enhancing customer experience and streamlining operations.
Considering these conducive trends, let’s examine the fundamentals of the three featured Foreign Consumer Finance stocks, beginning with the one ranked lower in our proprietary rating system.
Stock #3: Nomura Holdings, Inc. (NMR)
Headquartered in Tokyo, Japan, NMR provides various financial services to individuals, corporations, financial institutions, governments, and governmental agencies worldwide. It operates through three segments: Retail, Investment Management, and Wholesale.
On May 27, 2024, NMR and Laser Digital partnered with GMO Internet Group to explore issuing JPY and USD stablecoins in Japan. This collaboration aims to leverage their expertise in stablecoin issuance, providing top-notch service and a "Stablecoin-as-a-Service" solution for companies issuing stablecoins, including regulatory compliance management and blockchain technology integration.
Over the past three and five years, NMR’s revenue grew at CAGRs of 3.5% and 7.1%, respectively. Its total assets grew at a CAGR of 9.1% over the past three years.
NMR’s trailing-12-month gross profit margin of 77.31% is 30.1% higher than the industry average of 59.44%. Similarly, its trailing-12-month CAPEX / Sales of 9.33% is 394.1% higher than the industry average of 1.89%. However, the stock’s trailing-12-month asset turnover ratio of 0.03x is 86% lower than the industry average of 0.22x.
For the fiscal fourth quarter that ended March 31, 2024, NMR’s total revenue increased 51.9% year-over-year to ¥1.17 trillion ($7.54 billion). For the same quarter, its net income attributable to NMR shareholders and net income attributable to NMR shareholders per share stood at ¥56.75 billion ($365.30 million) and ¥18.02, up 669.5% and 670.1% from the year-ago quarter, respectively.
However, as of March 31, 2024, NMR’s total liabilities amounted to ¥51.70 trillion ($332.78 billion), compared to ¥44.55 trillion ($286.75 billion) as of March 31, 2023.
Street expects NMR’s fiscal 2026 revenue to increase 1.9% year-over-year to $10.57 billion. NMR’s stock has gained 71.7% over the past year, closing the last trading session at $6.30.
NMR’s POWR Ratings reflect its mixed prospects. It has an overall C rating, equating to Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
NMR has a C grade for Value and Momentum. Within the Foreign Consumer Finance industry, it is ranked #6 out of 9 stocks. Click here for the additional POWR Ratings of NMR (Growth, Stability, Sentiment, and Quality).
Stock #2: WEX Inc. (WEX)
WEX operates a commerce platform in the U.S. and internationally. It operates through three segments: Mobility, Corporate Payments, and Benefits Solutions.
On May 7, 2024, WEX announced that it reached an agreement with Shell to manage Shell’s portfolio of commercial fleet cards across North America. This will allow WEX to offer customers a full range of features, functionality, and solutions to meet the everyday demands of a modern commercial fleet.
On April 25, 2024, WEX announced that it reached a new long-term agreement with Booking.com, distinguishing WEX as Booking.com’s preferred virtual card provider as it continues providing WEX payment solutions in support of Booking.com’s payments vision to make buying and selling travel-related products and services more accessible for everyone.
Over the past three and five years, WEX’s revenue grew at CAGRs of 19.1% and 11.3%, respectively. Its EBIT grew at a CAGR of 63.4% over the past three years.
WEX’s trailing-12-month gross profit margin and EBITDA margin of 72.14% and 33.65% are 21.4% and 45.5% higher than the industry averages of 59.44% and 23.12%, respectively. On the other hand, WEX’s trailing-12-month asset turnover ratio of 0.19x is 12.2% lower compared to the industry average of 0.22x.
WEX’s total revenues for the fiscal first quarter that ended March 31, 2024, increased 6.7% year-over-year to $652.70 million. Moreover, its adjusted net income stood at $146.70 million, up marginally from the year-ago quarter.
Also, its adjusted earnings per share grew 4.5% over the prior-year quarter to $3.46. As of March 31, 2024, WEX’s total liabilities amounted to $12.64 billion, compared to $12.06 billion as of December 31, 2023.
For the quarter ending June 30, 2024, WEX’s revenue and EPS are expected to increase 9.3% and 4.8% year-over-year to $679.27 million and $3.80, respectively. It surpassed consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock gained 3.7% over the past year to close the last trading session at $182.89.
WEX’s POWR Ratings reflect this uncertain outlook. It has an overall rating of C, equating to Neutral in our proprietary rating system.
WEX has a C grade for Value, Momentum, Stability, Sentiment, and Quality. It is ranked #5 in the same industry. Get WEX’s Growth rating here.
Stock #1: ORIX Corporation (IX)
Headquartered in Tokyo, Japan, IX provides diversified financial services internationally. The company operates through Corporate Financial Services and Maintenance Leasing, Real Estate, PE Investment and Concession, Environment and Energy, Insurance, Banking and Credit, Aircraft and Ships, ORIX USA, ORIX Europe, and Asia and Australia segments.
On May 30, 2024, IX announced plans to build the Maibara-Koto Energy Storage Plant, one of Japan’s largest, in Maibara, Shiga. The plant aims to promote the effective use of renewable energy by charging as per excess or shortage and collaborating on land use with the public and unused land.
On May 1, 2024, IX announced that it commenced commercial operation of the Minami-Kayabe Geothermal Power Plant in Minami-Kayabe, Hokkaido. The power plant has a generation capacity of 6,500 kW (6.5 MW) and is Japan's largest binary cycle geothermal power plant.
Over the past three and five years, IX’s revenue grew at CAGRs of 7.1% and 3%, respectively. Its EBITDA grew at a CAGR of 11.8% over the past three years.
IX’s trailing-12-month EBITDA margin of 32.52% is 40.7% higher than the industry average of 23.12%. Likewise, its trailing-12-month Return on Total Assets of 2.12% is 99.8% higher than the industry average of 1.06%. Its trailing-12-month CAPEX / Sales of 42.67% is considerably higher than the industry average of 1.89%.
For the fiscal year that ended March 31, 2024, IX’s total revenues stood at ¥2.81 trillion ($18.12 billion), up 5.7% year-over-year. The company’s operating income rose 7.4% from the year-ago value to ¥360.71 billion ($2.32 billion).
Furthermore, its net income attributable to IX shareholders grew 19.2% and 21.3% over the previous year to ¥346.13 billion ($2.23 billion) and ¥298.05 per share, respectively.
Analysts expect IX’s revenue for the quarter ending June 30, 2024, to increase marginally year-over-year to $4.79 billion. IX’s stock has gained 24.8% over the past year to close the last trading session at $110.32.
IX’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to Buy in our proprietary rating system.
It has a B grade for Growth, Value, Stability, and Sentiment. It is ranked #2 in the Foreign Consumer Finance industry. Click here to see IX’s rating for Momentum and Quality.
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IX shares were trading at $110.27 per share on Wednesday morning, down $0.05 (-0.05%). Year-to-date, IX has gained 18.07%, versus a 12.06% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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