The financial services market is one of the ever-evolving and developing industries and offers excellent opportunity for investment. With the rapid urbanization and digitalization across the globe coupled with the surging demand for efficiency, the market is booming.
Amid this backdrop, investors could consider investing in financial services stocks Medallion Financial Corp. (MFIN), Navient Corporation (NAVI), and Consumer Portfolio Services, Inc. (CPSS) with low P/E ratios.
Financial services are an integral part of an economy, contributing to the financial segment and strengthening customers with wide product and service selection. With the growing digitalization and advancement in technologies, financial services are further positioned to experience strong growth.
From transactions like loans, insurance, account opening, and investments to services like online purchases and net banking, they are facilitated by financial institutions, reflecting the sector's necessity and need, which is continuously expanding with the complexes of modern society.
The global financial services market is expected to exhibit growth at a CAGR of 7.6%, resulting in a market volume of $44.92 trillion by 2028. Its growth prospect can be attributed to factors like the adoption of blockchain technology, increased use of digital banking services, implementation of artificial intelligence (AI), and rising urbanization.
Further, the adoption of AI in the financial services market to increase efficiency and productivity is revolutionizing the industry. AI is increasingly being applied to efficiently process data, automate and high-speed trading, process large data, and enhance analytical tools.
Therefore, with such trends, the financial services sector is thriving, and investors can benefit from it by parking their incomes in low P/E stocks. Such stocks are known for their low-risk and long-term gain traits.
Given these favorable market trends, let us dive deep into the fundamentals of the top Financial Services (Enterprise) stocks with low P/E ratios.
Stock #3: Medallion Financial Corp. (MFIN)
MFIN operates as a specialty finance company. The company operates through four segments: Recreation Lending; Home Improvement Lending; Commercial Lending; and Taxi Medallion Lending. It offers loans that finance consumer purchases of recreational vehicles, boats, and other consumer recreational equipment.
In terms of forward non-GAAP P/E, MFIN is trading at 6.75x, 49.7% lower than the industry average of 13.41x. Likewise, the stock’s forward Price/Sales and Price/Book of 1.04x and 0.60x are considerably lower than the industry averages of 3.25x and 1.35x, respectively.
During the third quarter that ended September 30, 2024, MFIN’s total interest income increased 16% year-over-year to $76.41 million, and its net interest income was $52.74 million, up 8.1% from the prior year’s quarter. Total net income attributable to MFIN stood at $8.61 million or $0.37 per share, respectively.
Analysts expect MFIN’s EPS for the second quarter (ending June 2025) to increase 43.3% year-over-year to $0.43. The company’s revenue is expected to grow 11.1% year-over-year to $55.41 million for the same period.
MFIN’s shares have gained 0.8% over the past month and 16.6% over the past six months to close the last trading session at $9.58.
MFIN’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Value, Stability, and Momentum. Within the Financial Services (Enterprise) industry, MFIN is ranked #9 out of 84 stocks.
Click here to access additional ratings of MFIN for Growth, Sentiment, and Quality.
Stock #2: Navient Corporation (NAVI)
NAVI offers technology-enabled education finance and business processing solutions for education, health care, and government clients. The company operates in three segments: Federal Education Loans; Consumer Lending; and Business Processing.
NAVI’s non-GAAP P/E of 6.49x is 51.6% lower than the 13.41x industry average. Similarly, its forward Price/Book multiple of 0.60 is 55.3% lower than the industry average of 1.35. Further, the stock’s forward Price/Sales of 2.90x is 11% lower than the 3.25x industry average.
On August 13, NAVI entered into an agreement to sell its Healthcare Services business to CorroHealth, a leading health technology company. The transaction was an important step in the company’s initiative to explore strategic options for its business processing solutions division.
Through the sale, the company also aims to simplify its operations, reduce its expense base, and enhance its flexibility.
During the nine months that ended September 30, 2024, NAVI posted a total interest income of $2.95 billion, whereas its FFELP loan interest income was $1.86 billion. The company’s total other income grew 52.2% from the year-ago period to $528 million. Also, the company’s net income and EPS totaled $107 million and $0.95 for the quarter, respectively.
Furthermore, the company’s cash and cash equivalents stood at $1.14 billion as of September 30, 2024, versus $977 million as of September 30, 2023.
Analysts expect NAVI’s EPS for the fourth quarter (ending December 2024) to increase 21.8% year-over-year to $0.26, and its revenue for the ongoing quarter is expected to be $136.80 million.
Shares of NAVI have surged 11% over the past month and 3.7% over the past six months to close the last trading session at $15.28.
NAVI’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
NAVI has a B grade for Value, Quality, and Momentum. The stock is ranked #7 among 84 stocks in the Financial Services (Enterprise) industry.
In addition to the POWR Ratings I’ve just highlighted, you can see NAVI’s ratings for Growth, Stability, and Sentiment here.
Stock #1: Consumer Portfolio Services, Inc. (CPSS)
CPSS is a specialty finance company. The company is involved in the purchase and service of retail automobile contracts originated by franchised automobile dealers and select independent dealers in the sale of new and used automobiles, light trucks, and passenger vans.
In terms of forward non-GAAP P/E, CPSS is currently trading at 12.54x, 6.5% lower than the industry average of 13.41x. Further, its forward Price/Sales of 0.58x is significantly lower than the industry average of 3.25x. Also, the stock’s forward Price/Book multiple of 0.77 is 42.6% lower than the industry average of 1.35.
On November 4, CPSS partnered with SentiLink, a leading provider of advanced identity verification and fraud detection solutions, to improve its fraud prevention efforts. SentiLink’s AI fraud protection technology will reduce fraud exposure by approximately $1 million per quarter. With this, CPSS will be able to identify legitimate, verified borrowers.
The strategic improvement in fraud detection also supports CPSS’ goal of significantly reducing lifetime portfolio losses, ultimately reinforcing financial performance.
During the third quarter that ended September 30, 2024, CPSS reported revenues of $100.58 million, up 9.2% year-over-year, and its income before income taxes was $6.85 million. Also, the company’s net income and EPS came in at $4.80 million and $0.20 for the quarter, respectively.
Furthermore, the company’s cash and cash equivalents stood at $8.07 million as of September 30, 2024, compared to $6.17 million as of December 31, 2023.
Street expects CPSS’ revenue for the fiscal year (ending December 2025) to increase 17.2% year-over-year to $457.79 million, and its EPS is expected to grow 212.9% year-over-year to $2.66 for the same year.
CPSS’ stock has increased 31.4% over the past six months and 16.6% over the past year to close the last trading session at $10.66.
CPSS’ POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
CPSS has a B grade for Value, Momentum, Quality, and Stability. It is ranked #4 out of 84 stocks in the same industry.
In addition to the POWR Ratings we’ve stated above, we also have CPSS ratings for Sentiment and Growth. Get all CPSS ratings here.
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NAVI shares were trading at $15.26 per share on Thursday afternoon, down $0.02 (-0.13%). Year-to-date, NAVI has declined -15.44%, versus a 29.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Financial Services Stocks With Low PE Ratios to Buy Now StockNews.com
