The financial market plays a critical role in varied operations, providing diverse services to customers, both individuals and organizations. The market's significance is evolving swiftly and growing with the adoption of cutting-edge technologies, widening operations, and increasing efficiency.
Given the industry’s robust prospects, undervalued financial stocks Enova International, Inc. (ENVA), Synchrony Financial (SYF), and NerdWallet, Inc. (NRDS) could be solid additions to your portfolio now.
Uncertainties stemming from the challenging macroeconomic conditions and geopolitical tensions have majorly impacted the operations of the financial services market. However, the medium-term M&A outlook appears positive as surrounding factors push financial services entities to accelerate their transformations, digitalization, and sustainable practices.
Further, technological advances have transformed the financial market landscape and skyrocketed the possible avenues. The financial services market is anticipated to expand to $44.93 trillion by 2028, exhibiting growth at a CAGR of 7.6%. Rising urbanization, AI in financial services, and rising demand for alternative investments contribute to the demand.
Digital technologies are vitally contributing to the drastic transformation of the financial industry from traditional banking to cutting-edge fintech, especially Artificial intelligence (AI). These innovations are enhancing operational efficiency by quickly processing massive amounts of data, business processes, and customer service experience.
Major aspects where AI has evolved the systems include fraud detection, algorithmic trading, investment advisory, loan underwriting, and dispute claims processing. AI in the finance market is projected to grow at 16.5% by 2030.
Given these encouraging trends, let’s look at the fundamentals of the top three Consumer Financial Services stocks, beginning with number 3.
Stock #3: Enova International, Inc. (ENVA)
ENVA is a technology and analytics company that offers online financial services internationally. It offers installment loans, line of credit accounts, and CSO programs, like arranging loans with independent third-party lenders and assisting in the preparation of loan applications and loan documents.
In terms of forward non-GAAP P/E, ENVA is trading at 8.66x, 24.7% lower than the industry average of 11.50x. Likewise, the stock’s forward Price/Sales multiple of 0.76 is 72.8% lower than the industry average of 2.80.
For the second quarter that ended June 30, 2024, ENVA’s revenue increased 25.8% year-over-year to $628.44 million. The company’s income from operations of $145.06 million indicates growth of 30% from the prior-year quarter. Also, its adjusted earnings were $61.64 million or $2.21 per share, up 11.5% and 28.5% year-over-year, respectively.
In addition, the company’s adjusted EBITDA grew 28.5% from the year-ago value to $162.53 million.
Analysts expect ENVA’s revenue and EPS for the third quarter (ending September 2024) to increase 20.9% and 56% year-over-year to $666.33 million and $2.34, respectively. Moreover, the company surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
ENVA’s stock has gained 21.7% over the past six months and 51.5% over the past year to close the last trading session at $75.13.
ENVA’s solid outlook is 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 and Momentum. Within the Consumer Financial Services industry, ENVA is ranked #15 among 47 stocks.
Click here to access additional ratings of ENVA (Stability, Growth, Quality, and Sentiment.
Stock #2: Synchrony Financial (SYF)
SYF operates as a consumer financial services company. The company provides credit products, including credit cards, commercial credit products, and consumer instalment loans. It also provides private label credit cards, dual co-brand and general purpose credit cards, short- and long-term instalment loans, and consumer banking products.
SYF’s forward Price/Sales of 1.17x is 58.1% lower than the industry average of 2.80x. Further, the stock’s forward non-GAAP P/E multiple of 7.84 is 31.8% lower than the industry average of 11.50.
On June 4, SYF partnered with Installation Made Easy to simplify the financing for kitchen, bath, and flooring installations for homeowners. This allows homeowners to buy materials from Floor & Decor and, schedule installation via IME, and pay for their entire project over time using Floor & Decor cards.
The collaboration is aimed at streamlining the entire home improvement process and making upgrades with the integration of financing and professional installation services.
For the second quarter that ended June 30, 2024, SYF’s net interest income increased 6.9% year-over-year to $4.41 billion, while its net revenue grew 12.7% from the year-ago value to $3.71 billion. Net earnings available to common stockholders and EPS stood at $624 million and $1.55, up 11.6% and 17.4% year-over-year, respectively.
Moreover, the company’s cash and equivalents were $18.63 billion as of June 30, 2024, versus $14.26 billion as of December 31, 2023.
Street expects SYF’s EPS and revenue for the third quarter (ending September 2024) to increase 23.5% and 7.7% year-over-year to $1.83 and $3.74 billion, respectively. Further, the company has surpassed the consensus revenue estimates in all of the trailing four quarters.
Over the past six months, the stock has gained 7.8% and 44.6% over the past year to close the last trading session at $45.84.
SYF’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, equating to a Buy in our proprietary rating system.
SYF has a B grade for Value, Momentum, and Quality. The stock is ranked #14 in the list of 47 stocks within the same industry.
To see the other ratings of SYF for Growth, Stability, and Sentiment, click here.
Stock #1: NerdWallet, Inc. (NRDS)
NRDS operates a digital platform that provides consumer-driven advice related to personal finance by connecting individuals and small and mid-sized businesses with financial product providers internationally. The platform offers guidance to consumers through educational content, tools and calculators, and product marketplaces.
In terms of forward EV/Sales, NRDS is trading at 1.34x, 56.9% lower than the industry average of 3.11x. Likewise, the stock’s forward EV/EBIT multiple of 285.98 is significantly lower than the industry average of 11.22. Also, its forward Price/Sales of 1.51x is 46.1% lower than the industry average of 2.80x.
During the second quarter that ended June 30, 2024, NRDS’ revenue increased 5.1% year-over-year to $150.60 million. The company’s adjusted EBITDA amounted to $14.30 million for the quarter. Also, the company's total current stood at $230 million as of June 30, 2024, compared to $198.40 million as of December 31, 2023.
According to the company's financial outlook for the third quarter of 2024, NRDS expects revenue between $172 and $180 million, reflecting growth of 15% year-over-year at the midpoint. Its non-GAAP operating income is expected in the range of $17 million - $21 million and adjusted EBITDA is set at $30.50 million - $34.50 million.
Street expects NRDS’ revenue for the first quarter (ending March 2025) to increase 10.5% year-over-year to $178.97 million, and its EPS for the same quarter is expected to grow 1020% year-over-year to $0.11. Also, it has topped the consensus revenue estimates in all three trailing quarters.
Shares of NRDS have surged 8.4% over the past month and 45.7% over the past year to close the last trading session at $12.24.
NRDS’ POWR Ratings reflect its solid prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
NRDS has a B grade for Value and Quality. It is ranked #6 among 47 stocks in the Consumer Financial Services industry.
In addition to the POWR Ratings highlighted above, you can check NRDS’ ratings for Growth, Stability, Momentum, and Sentiment 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.
SYF shares were trading at $46.31 per share on Thursday afternoon, up $0.47 (+1.03%). Year-to-date, SYF has gained 23.42%, versus a 18.26% 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.
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