Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. Market leaders have certainly capitalized on a favorable backdrop to boost profitability, helping fuel a 21.4% gain for the industry over the past six months. This performance has closely followed the S&P 500.
Nevertheless, investors should tread carefully as many firms are cyclical due to their leverage and exposure to regulatory changes. On that note, here are three financials stocks best left ignored.
Bread Financial (BFH)
Market Cap: $2.52 billion
Formerly known as Alliance Data Systems until its 2022 rebranding, Bread Financial (NYSE: BFH) provides credit cards, installment loans, and savings products to consumers while powering branded payment solutions for retailers and merchants.
Why Should You Sell BFH?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.4% annually over the last two years
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
Bread Financial is trading at $54.08 per share, or 6.9x forward P/E. Read our free research report to see why you should think twice about including BFH in your portfolio.
Stifel (SF)
Market Cap: $10.94 billion
Tracing its roots back to 1890 when the firm was established in St. Louis, Stifel Financial (NYSE: SF) is a financial services firm that provides wealth management, investment banking, and institutional brokerage services to individuals, corporations, and institutions.
Why Are We Wary of SF?
- Annual revenue growth of 7.5% over the last five years was below our standards for the financials sector
- Annual earnings per share growth of 4.1% underperformed its revenue over the last two years, showing its incremental sales were less profitable
- Annual book value per share growth of 4% over the last two years was below our standards for the financials sector
Stifel’s stock price of $108.46 implies a valuation ratio of 12.3x forward P/E. Dive into our free research report to see why there are better opportunities than SF.
Sezzle (SEZL)
Market Cap: $2.63 billion
Founded in 2016 as an alternative to traditional credit cards for younger shoppers, Sezzle (NASDAQ: SEZL) provides a payment platform that allows consumers to split purchases into four interest-free installments over six weeks at participating retailers.
Why Do We Think Twice About SEZL?
- Negative return on equity shows that some of its growth strategies have backfired
At $80.20 per share, Sezzle trades at 21.3x forward P/E. If you’re considering SEZL for your portfolio, see our FREE research report to learn more.
Stocks We Like More
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