Top 3 Consumer Financial Services Stocks to Consider for 2024
Financial markets are essential and play a critical role in different operations because of diverse services provided to customers, both individuals and organizations. The market’s significance is evolving quickly and gaining momentum with the integration of sophisticated technology, expansive operations, and efficiency.
With the bright future prospects of an industry such as this, some oversight to financial stock names like Enova International, Inc. (ENVA), Synchrony Financial (SYF), and NerdWallet, Inc. (NRDS) may present good buys for you today.
Macroeconomic pressures, coupled with geopolitics, have affected financial services sector businesses to a large extent. However, the near-to-medium-term M&A expectation is promising because factors on all sides force financial services organizations to hasten their change, digitalization, and sustainability.
The financial market landscape has changed considerably with the advancement of technology and upsurge in the number of possible avenues. The financial services market is expected to reach $44.93 trillion by 2028, growing at a CAGR of 7.6%. It can be mainly credited to the growth in the rate of urbanization, acceptance of AI in the financial services market, and increased demand for alternative investments.
Consumer Financial Services Stocks
Digital technologies make a critical contribution to the radical shift in the financial sector from traditional banking to cutting-edge fintech, in particular, Artificial intelligence. These innovations enhance efficiency in data processing volumes, business processes, and customer service experience.
Important areas where AI has transformed the systems include fraud detection, algorithmic trading, investment advisory, loan underwriting, and dispute claims processing. It is estimated that AI in the finance market will grow 16.5% by 2030.
With these bright visions, let’s get to know the basics of the top three Consumer Financial Services stocks, starting with number 3.
Stock #1: Enova International, Inc. (ENVA)
3 STOCKS TO DOUBLE THIS YEAR
ENVA is an online financial services company, which specializes in installment loans, line of credit accounts, and CSO programs, also involving structuring with independent third-party lenders and preparing applications and loan documents.
Forward non-GAAP P/E: A multiple of 8.66x, ENVA’s forward non-GAAP P/E is lower than the industry average of 11.50x by 24.7%. Likewise, its forward Price/Sales multiple of 0.76 is 72.8% lower than that of the industry average of 2.80.
ENVA’s revenues rose by 25.8% year-over-year to $628.44 million for the second quarter that ended June 30, 2024. The company’s income from operations of $145.06 million translates into growth of 30% from the prior-year quarter. Its adjusted earnings stood at $61.64 million or $2.21 per share; both rose by 11.5% and 28.5% year-over-year, respectively.
Its adjusted EBITDA was $162.53 million, a growth of 28.5% from the year-ago value.
Analysts are currently estimating ENVA’s third quarter EPS, which ended September 2024, to leap 20.9% and 56% from a year ago to $666.33 million and $2.34, respectively. The company has also topped earnings and sales estimates in three of the past four quarters.
Following the strong quarterly report, the stock of ENVA is up 21.7% over half a year and 51.5% above the past year to close at $75.13 during the last trading session.
ENVA’s strong performance is represented in its POWR Ratings. The stock holds a B overall rating, translating to a Buy in our proprietary rating system. The POWR Ratings represent an aggregate measure from 118 distinct factors, all weighted to an optimal extent.
The stock has an S&P Grade of B for Value and Momentum. In the Consumer Financial Services industry, ENVA stands at #15 out of 47.
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Stock #2: Synchrony Financial (SYF)
SYF is the consumer financial services company. The company offers credit products, which include credit cards, commercial credit products, and consumer instalment loans. It offers private label credit cards, dual co-brand and general purpose credit cards, short- and long-term instalment loans, and also consumer banking products.
SYF’s forward Price/Sales of 1.17x is 58.1% below the SBF industry average of 2.80x. In addition, the company’s forward non-GAAP P/E multiple of 7.84 is 31.8% below the SBF industry average of 11.50.
On June 4, SYF partnered with Installation Made Easy to make financing for kitchen, bath, and flooring installations for customers much less complicated. It will allow homeowners to buy materials from Floor & Decor, schedule installation through IME, and pay for their entire project over time using Floor & Decor cards.
The co-branding is aimed at making the overall process of home improvement straightforward while allowing upgrades with financing and professional installation services incorporated.
SYF’s net interest income rose 6.9% year-over-year to $4.41 billion for the second quarter that ended June 30, 2024. Its net revenue rose 12.7% from the year-ago value to $3.71 billion. Net earnings available to common stockholders and EPS came at $624 million and $1.55, respectively, jumping 11.6% and 17.4% year-over-year.
The company’s cash and equivalents were $18.63 billion as of June 30, 2024, compared with $14.26 billion as of December 31, 2023.
Street expects SYF’s EPS and revenue for the third quarter to come in at $1.83 and $3.74 billion, up 23.5% and 7.7% from the same period in the prior year. The company also has beaten the consensus revenue estimates in each of the trailing four quarters.
It has gained 7.8% in the last six months and is up 44.6% in a year. The latest closing price was $45.84 on the last trading session.
Strong Fundamentals Continue to Be Evident in POWR Ratings for SYF
Grade of B equates to a Buy in our proprietary rating system.
SYF has a B rating for Value, Momentum, and Quality. It is ranked #14 among the 47 stocks in the same industry.
Other ratings of SYF for Growth, Stability, and Sentiment
Stock #3: NerdWallet, Inc. (NRDS)
NRDS operates an e-platform that gives consumer-centric information on personal finance to connect individuals and small and mid-sized businesses with financial product providers based anywhere in the world. The website allows its consumers to access accessible advice through educational content, tools and calculators, and product marketplaces.
In terms of forward EV/Sales, NRDS is at 1.34x, the lowest among its peers, with 56.9% below the industry average of 3.11x. Also, the stock’s forward EV/EBIT multiple of 285.98 is far lower than the industry average of 11.22. Further, at a forward Price/Sales of 1.51x, it’s also far lower than the industry average of 2.80x by 46.1%.
Revenue at NRDS rose 5.1 percent year-over-year to $150.60 million in the second quarter ended June 30, 2024. The firm’s adjusted EBITDA was $14.30 million for the quarter. Moreover, total current stood at $230 million as of June 30, 2024 compared with $198.40 million as of December 31, 2023.
According to NRDS, the financial outlook for the third quarter of 2024 generates revenue of between $172 and $180 million and stands at 15% year-over-year growth at midpoint. The operating income in the range between $17 million and $21 million and EBITDA at $30.50 million-$34.50 million is adjusted.
Revenue is estimated to advance 10.5% year-over-year to $178.97 million for the first quarter (ending March 2025), with EPS for the same quarter expected to advance 1020% year-over-year to $0.11. In addition, it has beaten out revenue consensus estimates in all the trailing three quarters.
Shares of NRDS have gained 8.4% over the past month and 45.7% over the past year to close the last trading session at $12.24.
A healthy set of prospects lies behind NRDS’ POWR Ratings. Overall, the stock carries a grade of B, which translates to a Buy in our proprietary rating system.
Grade for Value and Quality: B
NRDS ranks #6 among the 47 stocks in the Consumer Financial Services industry.
You can find additional ratings for Growth, Stability, Momentum, and Sentiment for NRDS in addition to the POWR Ratings highlighted above.
SYF shares closed Thursday at $46.31 per share, up $0.47 or +1.03%. Year-to-date, SYF rose 23.42%, compared to the benchmark S&P 500 index that gained 18.26% over the same period.