Financial firms serve as the backbone of the economy, providing essential services from lending and investment management to risk management and payment processing. Market leaders have certainly capitalized on a favorable backdrop to boost profitability, helping fuel a 8.6% gain for the industry over the past six months. This performance has closely followed the S&P 500.

Regardless of these results, investors must exercise caution as many firms are sensitive to economic cycles and regulatory changes. Taking that into account, here are two financials stocks boasting durable advantages and one best left ignored.

One Financials Stock to Sell:

New Mountain Finance (NMFC)

Market Cap: $1.1 billion

Operating as a financial bridge for growing businesses that might be overlooked by traditional banks, New Mountain Finance (NASDAQ: NMFC) is a business development company that provides loans and debt financing to middle-market companies in defensive growth industries.

Why Do We Pass on NMFC?

1. Muted 2.3% annual revenue growth over the last two years shows its demand lagged behind its financials peers
2. Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew

New Mountain Finance is trading at $10.53 per share, or 8.2x forward P/E. Read our free research report to see why you should think twice about including NMFC in your portfolio.

Two Financials Stocks to Buy:

Visa (V)

Market Cap: $672 billion

Processing over 829 million transactions daily and connecting billions of cards to 150 million merchant locations worldwide, Visa (NYSE: V) operates one of the world's largest electronic payments networks, facilitating secure money movement across more than 200 countries through its VisaNet processing platform.

Why Are We Backing V?

1. Solid 11.2% annual revenue growth over the last five years indicates its offering’s solve complex business issues
2. Share buybacks propelled its annual earnings per share growth to 15.8%, which outperformed its revenue gains over the last five years
3. Market-beating return on equity illustrates that management has a knack for investing in profitable ventures

Visa’s stock price of $348.99 implies a valuation ratio of 28.2x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

Moody's (MCO)

Market Cap: $91.49 billion

Founded in 1900 during America's railroad boom when investors needed reliable information on bond risks, Moody's (NYSE: MCO) provides credit ratings, risk assessment tools, and analytical solutions that help organizations evaluate financial risks and make informed investment decisions.

Why Is MCO a Good Business?

1. Annual revenue growth of 15% over the last two years was superb and indicates its market share increased during this cycle
2. Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. ROE punches in at 67%, illustrating management’s expertise in identifying profitable investments

At $510 per share, Moody's trades at 34.9x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.

High-Quality Stocks for All Market Conditions

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