Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have certainly contributed to the indutry's recent underperformance - over the past six months, its 17.4% gain has fallen behind the S&P 500's 23.9% rise.
Investors should tread carefully as many of these firms are also cyclical, and any misstep can have you catching a falling knife. With that said, here are three financials stocks we’re passing on.
CME Group (CME)
Market Cap: $96.04 billion
Born from the Chicago Mercantile Exchange founded in 1898 as a butter and egg trading venue, CME Group (NASDAQ: CME) operates the world's largest derivatives marketplace where traders can buy and sell futures and options contracts across interest rates, equities, currencies, commodities, and more.
Why Do We Think Twice About CME?
- Sales trends were unexciting over the last five years as its 5.4% annual growth was below the typical financials company
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 9.8% annually
CME Group is trading at $267.21 per share, or 23.5x forward P/E. If you’re considering CME for your portfolio, see our FREE research report to learn more.
NCR Atleos (NATL)
Market Cap: $2.79 billion
Spun off from NCR Voyix in 2023 to focus exclusively on self-service banking technology, NCR Atleos (NYSE: NATL) provides self-directed banking solutions including ATM and interactive teller machine technology, software, services, and a surcharge-free ATM network for financial institutions and retailers.
Why Is NATL Risky?
- 1.8% annual revenue growth over the last two years was slower than its financials peers
- Earnings per share fell by 11.8% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
At $37.98 per share, NCR Atleos trades at 8.5x forward P/E. To fully understand why you should be careful with NATL, check out our full research report (it’s free for active Edge members).
StoneX (SNEX)
Market Cap: $5.01 billion
Originally known as INTL FCStone until its 2020 rebranding, StoneX Group (NASDAQ: SNEX) provides a global financial services network connecting companies, traders, and investors to markets through clearing, execution, and advisory services.
Why Is SNEX Not Exciting?
- Earnings per share lagged its peers over the last four years as they only grew by 3.2% annually
- Elevated debt-to-equity ratio of 7.2× suggests the firm is overleveraged and may struggle to secure additional financing
StoneX’s stock price of $96.05 implies a valuation ratio of 2.4x forward P/E. Dive into our free research report to see why there are better opportunities than SNEX.
Stocks We Like More
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