The financial services industry is set for promising growth due to easy access to digital services, growing demand for credit, higher consumer spending, and integration of advanced technologies.
Amid this backdrop, investors could consider buying fundamentally strong financial stocks: Visa Inc. (V), Broadridge Financial Solutions, Inc. (BR), and FLEETCOR Technologies, Inc. (FLT).
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s going on in the financial industry.
The financial services industry is crucial for shaping economies and facilitating various transactions and activities. Financial services are responsible for the proper management of capital within the economy across multiple sectors. Financial services include online banking, wealth management, investment management, insurance, instant payments, availability of on-demand credit, etc.,
The financial services sector is booming due to the proliferation of the Internet, growing smartphone usage, evolving customer demographics, technological advancements, inclusive government policies, etc. The financial services market is projected to grow at a CAGR of 7.6% to reach $44.93 trillion by 2028.
Financial institutions are rapidly improving user experiences with personalized services and faster transaction processing by using advanced tech like AI, data analytics, and blockchain. The rise in digital payments and online transactions offers substantial growth prospects for consumer finance companies. The global consumer finance market is expected to reach $1.96 trillion by 2029, growing at a CAGR of 7.1%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three financial stocks.
Visa Inc. (V)
V is an international payment technology company that operates VisaNet, a transaction processing network that enables the authorization, clearing, and settlement of payment transactions. It offers credit, debit, and prepaid card products, Visa Direct, Visa B2B Connect, Visa Cross-Border Solution, and Visa DPS (Data Processing Services).
On January 16, 2024, V completed its acquisition of Pismo, a global cloud-native issuer processing and core banking platform, enhancing its offerings with core banking and card-issuer processing capabilities via cloud-native APIs and enabling support for emerging payment schemes and RTP networks for financial institutions.
In terms of the trailing-12-month net income margin, V’s 53.92% is 128.9% higher than the 23.56% industry average. Its 19.67% trailing-12-month Return on Total Assets is considerably higher than the 1.10% industry average. Likewise, its 48.45% trailing-12-month Return on Common Equity is 343.2% higher than the industry average of 10.93%.
V’s net revenues for the first quarter ended December 31, 2023, increased 8.8% year-over-year to $8.63 billion. The company’s non-GAAP net income and non-GAAP EPS stood at $4.94 billion and $2.41, respectively, up 7.8% and 10.6% over the prior-year quarter.
Analysts expect V’s EPS and revenue for the quarter ending March 31, 2024, to increase 16.2% and 8.1% year-over-year to $2.43 and $8.63 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 31.1% to close the last trading session at $285.05.
V’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #8 out of 46 stocks in the B-rated Consumer Financial Services industry. It has an A grade for Quality and a B for Momentum and Stability. To access V’s grades for Growth, Value, and Sentiment, click here.
Broadridge Financial Solutions, Inc. (BR)
BR provides investor communications and technology-driven solutions for the financial services industry. It operates through two segments: Investor Communication Solutions and Global Technology and Operations.
On March 12, 2024, BR announced the launch of its global Futures and Options Software-as-a-Service (SaaS) platform, aimed at enhancing derivatives trading capabilities for sell-side institutions, with a top 3 Futures Commission Merchant (FCM) as an anchor client.
This platform offers new functionalities, improved order management, and comprehensive risk management, addressing challenges in fragmented workflows and enhancing client experience globally.
On March 10, 2024, BR announced that Matsui Securities had adopted its cloud-based SaaS post-trade processing solution to enhance operational efficiency in stock lending, reduce maintenance burdens, and open new markets while providing comprehensive transaction management features.
Matsui’s selection of BR’s cloud-based SaaS post-trade processing solution showcases the strength of its solutions.
In terms of the trailing-12-month EBITDA margin, BR’s 23.10% is 69.2% higher than the 13.65% industry average. Its 13.39% trailing-12-month levered FCF margin is 105.3% higher than the industry average of 6.52%. Likewise, its 10.82% trailing-12-month net income margin is 86.1% higher than the industry average of 5.81%.
BR’s revenues for the fiscal second quarter that ended December 31, 2023, amounted to $1.41 billion, up 8.7% year-over-year. Its adjusted operating income increased marginally over the prior-year quarter to $174.50 million. In addition, its adjusted net earnings and adjusted earnings per share increased 1.1% each from the year-ago value to $109.60 million and $0.92, respectively.
Street expects BR’s EPS for the quarter ending March 31, 2024, to increase 9.3% year-over-year to $2.24. Its revenue for the same quarter is expected to increase 7.4% year-over-year to $1.77 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 47.6% to close the last trading session at $199.48.
It’s no surprise that BR has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum and Sentiment. Within the Financial Services (Enterprise) industry, it is ranked #10 out of 101 stocks. In total, we rate BR on eight different levels. Beyond what we have stated above, we also have given BR grades for Growth, Value, Stability, and Quality. Get all the BR ratings here.
FLEETCOR Technologies, Inc. (FLT)
FLT is a payments company that helps businesses and consumers manage vehicle-related expenses, lodging expenses, and corporate payments internationally. It operates through segments such as Vehicle Payments, Corporate Payments, Lodging Payments, and Other.
On November 6, 2023, FLT announced the acquisition of PayByPhone, a global digital parking payment solutions provider, expanding its vehicle payment offerings for fleet customers and consumers, with strategic objectives to enhance B2B services and launch consumer vehicle payments in the UK.
In terms of the trailing-12-month EBIT margin, FLT’s 44.09% is 93.4% higher than the 22.80% industry average. Its 6.34% trailing-12-month Return on Total Assets is 477.6% higher than the 1.10% industry average. Additionally, its 4.09% trailing-12-month Capex / Sales is 100.2% higher than the 2.05% industry average.
For the fourth quarter that ended December 31, 2023, FLT’s net revenues increased 6.1% year-over-year to $937.32 million. The company’s operating income grew 14.8% year-over-year to $424.05 million. Its adjusted net income stood at $326.14 million and $4.44 per share, up 8.6% and 9.9% over the prior-year quarter, respectively.
For the quarter ending March 31, 2024, FLT’s EPS and revenue are expected to increase 8.4% and 4.5% year-over-year to $4.12 and $941.50 million, respectively. Over the past year, FLT’s stock has gained 60% to close the last trading session at $299.42.
FLT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has a B grade for Momentum and Quality. It is ranked #5 in the Financial Services (Enterprise) industry. To see FLT’s Growth, Value, Stability, and Sentiment ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
V shares fell $0.50 (-0.18%) in premarket trading Tuesday. Year-to-date, V has gained 9.69%, versus a 7.90% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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