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 15.6% gain has fallen behind the S&P 500's 18.8% rise.
The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. On that note, here is one financials stock poised to generate sustainable market-beating returns and two we’re swiping left on.
Two Financials Stocks to Sell:
Voya Financial (VOYA)
Market Cap: $7.21 billion
Originally spun off from Dutch financial giant ING in 2013 and rebranded with a name suggesting "voyage," Voya Financial (NYSE: VOYA) provides workplace benefits and savings solutions to U.S. employers, helping their employees achieve better financial outcomes through retirement plans and insurance products.
Why Does VOYA Fall Short?
- Sales trends were unexciting over the last five years as its 6.9% annual growth was below the typical financials company
- Performance over the past two years shows its incremental sales were less profitable as its earnings per share were flat
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 16.4% annually over the last five years
At $74.80 per share, Voya Financial trades at 8.5x forward P/E. To fully understand why you should be careful with VOYA, check out our full research report (it’s free).
OneMain (OMF)
Market Cap: $6.71 billion
Dating back to 1912 and formerly known as Springleaf, OneMain Holdings (NYSE: OMF) provides personal loans, auto financing, and credit cards to nonprime consumers who have limited access to traditional banking services.
Why Does OMF Give Us Pause?
- Muted 3.8% annual revenue growth over the last five years shows its demand lagged behind its financials peers
- Earnings per share were flat over the last two years while its revenue grew, showing its incremental sales were less profitable
- Elevated debt-to-equity ratio of 6.6× suggests the firm is overleveraged and may struggle to secure additional financing
OneMain is trading at $57.18 per share, or 8x forward P/E. Dive into our free research report to see why there are better opportunities than OMF.
One Financials Stock to Watch:
Corpay (CPAY)
Market Cap: $20.34 billion
Formerly known as FLEETCOR until its 2024 rebrand, Corpay (NYSE: CPAY) provides specialized payment solutions for businesses to manage vehicle expenses, corporate payments, and lodging costs with enhanced control and reporting capabilities.
Why Are We Fans of CPAY?
- Annual revenue growth of 10.2% over the last five years was above the sector average and underscores its products and services value to customers
- Share buybacks lifted its annual earnings per share growth to 12.2%, which outperformed its revenue gains over the last five years
- ROE punches in at 31.1%, illustrating management’s expertise in identifying profitable investments
Corpay’s stock price of $290.94 implies a valuation ratio of 12.7x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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