Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. But uncertainty about fiscal and monetary policy has tempered enthusiasm, limiting the industry's gains to 3.9% over the past six months. This return lagged the S&P 500's 16.3% climb.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here are two financials stocks we think can generate sustainable market-beating returns and one that may face trouble.
One Financials Stock to Sell:
Morgan Stanley (MS)
Market Cap: $263.2 billion
Founded in 1924 during the post-WWI economic boom by former JP Morgan partners, Morgan Stanley (NYSE: MS) is a global financial services firm that provides investment banking, wealth management, and investment management services to corporations, governments, institutions, and individuals.
Why Does MS Worry Us?
- Large asset base makes it harder to grow tangible book value per share quickly, and its annual tangible book value per share growth of 1.7% over the last five years was below our standards for the financials sector
At $166.00 per share, Morgan Stanley trades at 16.4x forward P/E. Check out our free in-depth research report to learn more about why MS doesn’t pass our bar.
Two Financials Stocks to Watch:
Paymentus (PAY)
Market Cap: $4.71 billion
Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE: PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.
Why Are We Bullish on PAY?
- Annual revenue growth of 39% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 86.3% annually, topping its revenue gains
Paymentus’s stock price of $36.80 implies a valuation ratio of 49.6x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free for active Edge members.
Jack Henry (JKHY)
Market Cap: $11.96 billion
Founded in 1976 by two entrepreneurs who saw the need for specialized banking software in the early days of financial computing, Jack Henry & Associates (NASDAQ: JKHY) provides technology solutions that help banks and credit unions innovate, differentiate, and compete while serving the evolving needs of their accountholders.
Why Is JKHY Interesting?
- Incremental sales over the last two years have been more profitable as its earnings per share increased by 15.3% annually, topping its revenue gains
- Industry-leading 23.8% return on equity demonstrates management’s skill in finding high-return investments
Jack Henry is trading at $165.26 per share, or 26.4x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
High-Quality Stocks for All Market Conditions
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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