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, and over the past six months, the industry has pulled back by 2.4%. This drop is a noticeable divergence from the S&P 500’s 7.7% return.
While some firms have strong balance sheets and diversified revenue streams that enable them to thrive in any environment, the odds aren't great for the ones we're analyzing today. Taking that into account, here are three financials stocks we’re passing on.
State Street (STT)
Market Cap: $36.73 billion
Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE: STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.
Why Does STT Fall Short?
- The company has faced growth challenges as its 3.6% annual revenue increases over the last five years fell short of other financials companies
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 9.1% annually
State Street’s stock price of $131.62 implies a valuation ratio of 11.4x forward P/E. If you’re considering STT for your portfolio, see our FREE research report to learn more.
FactSet (FDS)
Market Cap: $7.19 billion
Founded in 1978 when financial data was still primarily delivered through paper reports, FactSet (NYSE: FDS) provides financial data, analytics, and technology solutions that investment professionals use to research, analyze, and manage their portfolios.
Why Does FDS Worry Us?
- 5.5% annual revenue growth over the last two years was slower than its financials peers
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 8.1% annually
At $196.39 per share, FactSet trades at 11.5x forward P/E. Dive into our free research report to see why there are better opportunities than FDS.
Main Street Capital (MAIN)
Market Cap: $5.52 billion
With a focus on building long-term partnerships rather than quick transactions, Main Street Capital (NYSE: MAIN) is a business development company that provides long-term debt and equity capital to lower middle market and middle market companies.
Why Is MAIN Not Exciting?
- Incremental sales over the last two years were less profitable as its earnings per share were flat while its revenue grew
- Muted 7.5% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its financials peers
Main Street Capital is trading at $61.81 per share, or 15.6x forward P/E. To fully understand why you should be careful with MAIN, check out our full research report (it’s free).
Stocks We Like More
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 5 Growth Stocks for this month. 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-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
