Despite moderate economic growth and increasing debt burdens in 2024, the finance market is set to benefit from anticipated rate cuts, growing demand for installment loan products, credit services, and middle-market investment banks, alongside full-service broker-dealers offering comprehensive financial solutions.
Amid this backdrop, it could be wise to invest in fundamentally strong financial stocks, such as Oppenheimer Holdings Inc. (OPY), Atlanticus Holdings Corporation (ATLC), and Regional Management Corp. (RM). These stocks are A (Strong Buy) rated in our proprietary POWR Ratings system.
As interest rates are anticipated to decrease, demand for financial services, particularly loans, is expected to rise, even amid stricter credit standards and concerns about loan quality. The Fed is predicted to initiate a series of rate cuts soon, with markets anticipating around 250 basis points of reductions by the end of 2025. This expectation is likely to enhance market confidence and drive strong returns.
According to Statista, the total revenue of the worldwide finance market is expected to grow at a CAGR of 9.1%, reaching $2.89 billion by 2029. Meanwhile, as finance companies expand their offerings, brokers are tailoring their services to meet individual client needs with customized investment solutions. The U.S. securities brokerage market is projected to reach $242.33 billion by 2029, with a CAGR of 4.2%.
Moreover, with no imminent signs of recession, investors can anticipate favorable conditions for equities, particularly if the U.S. economy remains resilient. This stability makes finance stocks a compelling investment opportunity. Considering these conducive trends, let’s analyze the fundamental aspects of the three financial stocks.
Oppenheimer Holdings Inc. (OPY)
OPY operates as a middle-market investment bank and full-service broker-dealer in the Americas, Europe, the Middle East, and Asia. The company provides brokerage services covering corporate equity and debt securities, money market instruments, exchange-traded options and futures contracts, municipal bonds, mutual funds, exchange-traded funds, and unit investment trusts.
In terms of the trailing-12-month gross profit margin, OPY’s 90.14% is 50.7% higher than the 59.81% industry average. Its 1.88% trailing-12-month Return on Total Assets margin is 77.3% higher than the 1.06% industry average. Moreover, OPY’s 0.39x trailing-12-month asset turnover ratio is 78.4% higher than the 0.22x industry average.
OPY’s total revenue for the second quarter ended June 30, 2024, increased by 8% year-over-year to $330.59 million. The company’s net income attributable to OPY was $10.27 million, or $0.92 per share, compared to a net loss of $9.40 million, or $0.85 per share, in the prior period.
OPY surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, OPY’s stock has gained 32.8% to close the last trading session at $50.71.
OPY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Value. It is ranked first out of 20 stocks in the Investment Brokerage industry. To see OPY’s Momentum, Stability, Sentiment, and Quality ratings, click here.
Atlanticus Holdings Corporation (ATLC)
ATLC is a financial technology company that provides credit and related financial services and products to customers. It operates in two segments: Credit as a Service and Auto Finance.
In terms of the trailing-12-month net income margin, ATLC’s 28.16% is 25.8% higher than the 22.39% industry average. Likewise, its 19.25% trailing-12-month Return on Common Equity margin is 86.9% higher than the 10.30% industry average. Furthermore, its 3.59% trailing-12-month Return on Total Assets is 239.3% higher than the 1.06% industry average.
During the second quarter ended June 30, 2024, ATLC’s total revenue increased 8.7% year-over-year to $316.02 million. Its total operating revenue rose 8.6% compared to the prior-year quarter, reaching $315.64 million. Additionally, the company’s net income attributable to common shareholders was $17.97 million, or $0.99 per share.
Analysts expect ATLC’s EPS and revenue for the quarter ending September 30, 2024, to increase 19.7% and 10.8% year-over-year to $1.23 and $326.72 million, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 24.8% to close the last trading session at $33.06.
It’s no surprise that ATLC has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has a B grade for Value, Momentum, Stability, and Quality. Within the Consumer Financial Services industry, it is ranked #4 out of 47 stocks. Beyond what we have stated above, we also have given ATLC grades for Growth and Sentiment. Get all the ATLC ratings here.
Regional Management Corp. (RM)
RM is a diversified consumer finance company that provides various installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders in the United States.
In terms of the trailing 12-month Return on Total Assets, RM’s 1.39% is 31.4% higher than the industry average of 1.06%. Similarly, RM’s 0.31x trailing-12-month asset turnover ratio is 45.4% higher than the industry average of 0.22x.
For the fiscal second quarter that ended June 30, 2024, RM’s total revenue increased 7.1% year-over-year to $143.03 million. Its net income stood at $8.45 million, or $0.86 per common share, respectively, up 40.2% and 36.5% year-over-year. In addition, the company’s total assets of $1.79 billion indicate an increase of 3.8% from the previous year’s period.
Street expects RM’s revenue for the quarter ending September 30, 2024, to increase 5% year-over-year to $147.86 million. Its EPS for the same quarter is expected to grow 15.2% year-over-year to $1.05. It has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 42% to close the last trading session at $33.26.
RM’s positive outlook is reflected in its POWR Ratings. It has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It is ranked first in the Consumer Financial Services industry. It has a B grade for Value, Momentum, Stability, Sentiment, and Quality. To access RM’s grades for Growth, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
OPY shares were trading at $50.25 per share on Tuesday afternoon, up $0.01 (+0.02%). Year-to-date, OPY has gained 22.97%, versus a 19.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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