The financial sector has seen massive changes in the past few years, especially during the pandemic. Financial companies are actively adopting digitization to modernize their commercial businesses to remain resilient amid growing competition and rising demand for simplified and quick commercial processes. Also, financial companies are investing significantly in big data analytics capabilities to serve clients better. The global financial services market is expected to reach $28.53 trillion in 2025, growing at a CAGR of 6%.
In addition, the Fed’s plans to aggressively hike rates this year should benefit financial companies. JPMorgan Chase economists now see the Federal Reserve hiking interest rates nine consecutive times until March 2023. The financial sector usually benefits from higher rates through increased profit margins. Bullish investor sentiment around the industry is evident in the Financial Select Sector SPDR ETF’s (XLF) 0.4% returns year-to-date versus the SPDR S&P 500 Trust ETF’s (SPY) 8.6% slump over this period.
Given this backdrop, financial stocks Everest Re Group, Ltd. (RE), Old Republic International Corporation (ORI), and Encore Capital Group, Inc. (ECPG), which have witnessed a solid run lately, could continue soaring. So, these stocks could be solid investments right now.
Everest Re Group, Ltd. (RE)
Headquartered in Hamilton, Bermuda, RE provides reinsurance and insurance products internationally. The company operates through Reinsurance Operations and Insurance Operations segments.
Last month, RE shared that it has become an official signatory of the UN Principles for Sustainable Insurance (PSI), a global framework for a sustainable insurance industry developed through a partnership between risk management leaders and the United Nations Environment Programme Finance Initiative. “Everest is proud to be a signatory to the UN Principles for Sustainable Insurance and advance a responsible, inclusive culture that is governed by our purpose and values,” said Juan C. Andrade, Everest President, and CEO.
For the fiscal fourth quarter ended December 2021, RE’s gross written premium increased 24.7% from the prior-year quarter to $3.43 billion, while net written premium rose 24.8% year-over-year to $3.06 billion. RE’s net income increased 577.2% year-over-year to $430.70 million. The company’s net income per share improved 588.1% year-over-year to $10.94.
Analysts expect RE’s revenues to come in at $10.80 billion in the current year, indicating an increase of 17.4% year-over-year. Also, its EPS is expected to increase 19.40% from the year-ago value to $30.57 in the current year.
RE shares have gained 26.4% over the past year and 11.1% year-to-date to close the last trading session at $304.42. The stock is trading just 1.1% below its 52-week high of $307.76.
It’s no surprise RE has an overall rating of B, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
RE also has a B grade for Momentum. The stock is ranked #1 among the eight stocks in the Insurance – Reinsurance industry. To see additional RE ratings for Growth, Sentiment, Value, Stability, and Quality, click here.
Old Republic International Corporation (ORI)
ORI engages in the insurance underwriting and related services business primarily in the United States and Canada. The company operates through three segments: General Insurance; Title Insurance; and the Republic Financial Indemnity Group Run-off Business.
Last month, Old Republic National Title Insurance Company, a subsidiary of ORI, announced the acquisition of the operating assets of Utah-based Mountain View Title & Escrow, Inc., a recognized leader in handling residential and commercial real estate transactions. The acquisition adds nine office locations and 86 employees to Old Republic Title’s existing network of direct operations that includes more than 270 branch and subsidiary office locations nationwide. The company expects this acquisition to accelerate its growth plans in Utah.
ORI’s net premium and fees earned increased 11.3% year-over-year to $2.12 billion in the fiscal fourth quarter ended December 31. Total operating revenues grew 10.6% year-over-year to $2.27 billion, while net income rose 20.6% year-over-year to $627 million. The company’s EPS increased 18.4% year-over-year to $2.06.
Street expects the company’s revenue to come in at $2.06 billion in the fiscal first quarter ending March 2022, indicating an increase of 4.1% from the prior-year quarter. The company’s EPS is expected to increase 10% per annum over the next five years. Moreover, ORI has topped the consensus EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, ORI has gained 34.2% to close the last trading session at $26.31. The stock has gained 7% year-to-date. It is trading just below its 52-week high of $27.19.
ORI’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. ORI is also rated B in Value, Momentum, and Sentiment. Of the 55 stocks in the Insurance - Property & Casualty industry, ORI is ranked #14.
In addition to the POWR Ratings grades highlighted, one can see the ORI’s Growth, Stability, and Quality ratings here.
Encore Capital Group, Inc. (ECPG)
ECPG is a specialty finance company that provides debt recovery solutions and other related services for consumers across various financial assets worldwide.
In December 2021, the company announced the final results of its tender offer. Based on the final count by the depositary for the tender offer, a total of 4,471,995 shares of common stock were validly tendered. The company accepted all of these shares of common stock for purchase at $60.00 per share. “After having completed this transaction, we remain well-positioned with leverage near the low-end of our target range and available liquidity to capitalize on our core market opportunities and continue executing our strategy,” said Ashish Masih, Encore’s President, and Chief Executive Officer.
In the three months ended September 30, 2021, total revenues increased 2.2% year-over-year to $412.62 million. Income from operations rose 17% from the prior-year quarter to $166.65 million. Net income came in at $83.57 million, indicating an increase of 51.6% year-over-year. Its EPS increased 54.7% from the year-ago value to $2.66.
The consensus revenue estimate of $1.62 billion for the fiscal year ended December 2021 indicates an increase of 7.8% year-over-year. Analysts expect the company’s EPS to increase 40.6% year-over-year to $10.90 in the same period. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 121.6% over the past year to close the last trading session at $71.65. ECPG shares have gained 15.4% year-to-date. ECPG had hit its 52-week high of $72.32 in its last trading session.
ECPG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
ECPG’s also has a B grade for Value and Quality. Among the 114 stocks in Financial Services (Enterprise) industry, it is ranked #6. Click here to view additional ratings for Growth, Sentiment, Momentum, and Stability.
RE shares were unchanged in after-hours trading Tuesday. Year-to-date, RE has gained 9.68%, versus a -9.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
3 Unstoppable Financial Stocks to Buy Right Now: Encore Capital Group, Everest Re Group, and Old Republic International StockNews.com
