As digitization and demographic shifts reshape consumer behaviors and expectations, the financial services sector is swiftly incorporating disruptive fintech innovations. This integration is not only meeting evolving consumer needs but also fueling increased demand within the industry.
Given the solid backdrop, this article sheds light on three fundamentally sound consumer finance stocks, Visa Inc. (V), Grupo Supervielle S.A. (SUPV), and EZCORP, Inc. (EZPW), which appear well-equipped to thrive amid the industry tailwinds.
In the aftermath of the pandemic, there has been a notable surge in demand for consumer finance services, which encompass a diverse array of offerings such as savings and checking accounts, loans, credit cards, insurance, investment products, and various payment services.
This heightened demand is largely attributed to the widespread adoption of the internet and mobile technologies, which have made it imperative for these services to be accessible online.
Additionally, with a growing emphasis on convenience and efficiency, financial institutions face mounting pressure to modernize their offerings. This involves investing in intuitive interfaces, providing tailored experiences, and streamlining transaction processes to align with evolving consumer demands.
The growing preference for digital payments and online transactions signals promising growth opportunities for consumer finance companies. Projections indicate that the global consumer finance market is poised to reach $1.96 trillion by 2029, growing at a CAGR of 7.1% from 2023 to 2029.
On top of it, this year, generative AI is anticipated to emerge as the predominant trend, revolutionizing the entire financial services sector. Generative AI technologies enable more accurate risk assessment by analyzing complex data sets and identifying patterns indicative of potential risks.
The global market for generative AI in financial services is projected to reach $11.22 billion, demonstrating a remarkable CAGR of 28.4% spanning 2023 to 2032. By embracing AI technologies such as generative AI, financial institutions can navigate the evolving landscape of digital finance and effectively meet the needs of organizations and individuals in the years to come.
In light of such encouraging trends and prospects, let’s now dig deeper into the fundamentals of the aforementioned stocks in detail:
Visa Inc. (V)
V operates as a payment technology company in the United States and internationally. The company offers credit, debit, and prepaid card products. In addition, it provides VisaNet, Visa Direct, Visa DPS, and Visa Cross-Border Solution.
On January 16, 2024, V finalized its acquisition of Pismo, a global cloud-native issuer processing and core banking platform. This acquisition allows V to offer clients core banking and card-issuer processing capabilities across all product types through cloud-native APIs.
Additionally, Pismo's platform enables V to provide support and connectivity for emerging payment schemes and Real-Time Payment (RTP) networks to financial institution clients.
On December 18, 2023, V acknowledged the importance of embedding payment capabilities for faster transactions by expanding its Fintech Fast Track program. Beyond card issuance, this program now connects members to V’s real-time money movement platform, Visa Direct.
V’s Senior Vice President and Global Head of Innovation and Digital Partnerships, Vanessa Colella, highlighted the crucial role of fintechs as a growth engine for the payments industry. She anticipates that the Fintech Fast Track program will be transformative, creating new growth opportunities within the Fintech community and aligning with V’s mission to uplift individuals globally.
V’s trailing-12-month EBIT margin of 67.34% is 215.5% higher than the industry average of 21.35%. Its trailing-12-month EBITDA margin of 70.23% is 223.5% higher than the 21.71% industry average. Furthermore, the stock’s trailing-12-month net income margin of 53.92% is 131.2% higher than the industry average of 23.32%.
For the fiscal 2024 first quarter, which ended on December 31, 2023, V’s net revenues increased 8.8% year-over-year to $8.63 billion, while its operating income came in at $5.95 billion, up 16.9% from the prior-year quarter. The company’s non-GAAP net income and non-GAAP EPS rose 7.8% and 10.6% from the year-ago value to $4.94 billion and $2.41, respectively.
The consensus revenue estimate of $8.63 billion for the fiscal second quarter (ending March 2024) represents an 8.1% improvement year-over-year. Meanwhile, the consensus EPS estimate of $2.43 for the ongoing quarter reflects a 16.2% year-over-year rise. Additionally, the company surpassed its revenue and EPS estimates in each of the trailing four quarters, which is impressive.
V's revenue and EBIT have grown at CAGRs of 15.8% and 17.2% over the past three years, respectively. While its net income and EPS have increased at CAGRs of 18.8% and 21.5% over the same time frame, respectively.
The stock has gained 19.2% over the past three months to close the last trading session at $277.36.
V’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Momentum, Stability, and Sentiment. In the B-rated 46-stock Consumer Financial Services industry, it is ranked #5. Click here to see V’s ratings for Growth and Value.
Grupo Supervielle S.A. (SUPV)
Based in Buenos Aires, Argentina, SUPV operates as a financial services holding company providing various banking products and services in Argentina. The company operates through Personal & Business Banking; Corporate Banking; Bank Treasury; Consumer Finance’ Insurance; and Asset Management and Other Services segments.
SUPV’s trailing-12-month CAPEX/Sales of 4.68% is 126.5% higher than the industry average of 2.07%. Its trailing-12-month Return On Total Assets (ROTA) of 1.69% is 55.5% higher than the 1.08% industry average. Furthermore, the stock’s trailing-12-month Return on Common Equity (ROCE) of 15.13% is 40.9% higher than the industry average of 10.74%.
For the fiscal third quarter, which ended on September 30, 2023, SUPV’s net interest income increased 35.9% year-over-year to ARS 65.06 billion ($78.81 million). Its operating income rose significantly from the year-ago value to ARS 15.22 billion ($18.44 million).
Moreover, during the same period, the company’s attributable net income came in at ARS 9.48 billion ($11.48 million), compared to an attributable net loss of ARS 1.34 billion ($1.67 million) in the prior-year quarter.
The company topped its revenue estimates in three of the trailing four quarters, which is promising. Additionally, SUPV’s revenue has grown at CAGRs of 33.4% and 43.2% over the past three and five years, respectively. Also, its total assets improved at a 76.2% CAGR over the past three years.
Over the past three months, the stock has soared 141.8% to close the last trading session at $4.40.
SUPV’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Growth, Value, and Momentum. Within the nine-stock Foreign Consumer Finance industry, it is ranked #3. Click here to see the other ratings of SUPV for Stability, Sentiment, and Quality.
EZCORP, Inc. (EZPW)
EZPW offers pawn loans collateralized by tangible personal property, jewelry, consumer electronics, tools, sporting goods, and musical instruments. The company operates through three segments: U.S. Pawn; Latin America Pawn; and Other Investments.
EZPW’s trailing-12-month CAPEX/Sales of 3.86% is 86.6% higher than the industry average of 2.07%. Its trailing-12-month ROTA of 2.62% is 141.8% higher than the 1.08% industry average. Furthermore, the stock’s trailing-12-month asset turnover ratio of 0.75x is 256.6% higher than the industry average of 0.21x.
For the fiscal fourth quarter, which ended on September 30, 2023, EZPW’s total revenues increased 15.9% year-over-year to $270.48 million, while its adjusted gross profit rose 12.4% from the prior-year quarter to $154.60 million.
In addition, the company’s adjusted net income improved 61.7% from the year-ago value to $17.30 million. Also, its adjusted EPS came in at $0.23, up 53.3% year-over-year.
Street expects EZPW’s revenue and EPS for the fiscal 2024 first quarter (ended December 2023) to increase 12% and 1.8% year-over-year to $296.13 million and $0.29, respectively. Moreover, the company has an excellent surprise history, surpassing its revenue and EPS estimates in each of the trailing four quarters.
EZPW’s revenue has increased at CAGRs of 8.4% and 5.3% over the past three and five years, respectively. Meanwhile, its EBITDA improved at a 30.3% CAGR over the past three years.
EZPW’s shares have surged 6% over the past three months to close the last trading session at $8.63.
It’s no surprise that EZPW has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Growth, Value, and Momentum. Out of 46 stocks in the Consumer Financial Services industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have EZPW’s ratings for Stability, Sentiment, and Quality. Get all EZPW ratings here.
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V shares were trading at $275.29 per share on Wednesday afternoon, down $1.86 (-0.67%). Year-to-date, V has gained 5.74%, versus a 2.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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