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 25.1% gain has fallen behind the S&P 500's 29.3% rise.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. On that note, here are two financials stocks boasting durable advantages and one best left ignored.
One Financials Stock to Sell:
T. Rowe Price (TROW)
Market Cap: $22.78 billion
Founded in 1937 by Thomas Rowe Price Jr., who pioneered the growth stock investing approach, T. Rowe Price (NASDAQ: TROW) is an investment management firm that offers mutual funds, advisory services, and retirement planning solutions to individuals and institutions.
Why Are We Cautious About TROW?
- Annual revenue growth of 4.2% over the last five years was below our standards for the financials sector
- Incremental sales over the last five years were less profitable as its 1.3% annual earnings per share growth lagged its revenue gains
T. Rowe Price’s stock price of $104 implies a valuation ratio of 10.3x forward P/E. To fully understand why you should be careful with TROW, check out our full research report (it’s free for active Edge members).
Two Financials Stocks to Watch:
Moelis (MC)
Market Cap: $5.02 billion
Founded in 2007 by veteran banker Ken Moelis during the lead-up to the financial crisis, Moelis & Company (NYSE: MC) is an independent investment bank that provides strategic and financial advisory services to corporations, financial sponsors, governments, and sovereign wealth funds.
Why Are We Backing MC?
- Annual revenue growth of 31.7% over the past two years was outstanding, reflecting market share gains this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 86.4% annually, topping its revenue gains
- ROE punches in at 45%, illustrating management’s expertise in identifying profitable investments
Moelis is trading at $67.70 per share, or 23.6x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
AvidXchange (AVDX)
Market Cap: $2.08 billion
Born from the frustration of paper-based accounting processes in the early 2000s, AvidXchange (NASDAQ: AVDX) provides accounts payable automation software and payment solutions that help middle-market businesses digitize and streamline their invoice processing and payments.
Why Do We Like AVDX?
- Market share has increased this cycle as its 22% annual revenue growth over the last five years was exceptional
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 69.6% over the last two years outstripped its revenue performance
At $9.99 per share, AvidXchange trades at 4.3x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free for active Edge members.
Stocks We Like Even More
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 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 for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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