The financial services industry is vital in shaping economies and facilitating transactions. With easy access to digital services, the proliferation of the Internet, increased demand for credit, rising consumer spending, and the integration of advanced technologies like AI, blockchain, cloud, and data analytics, the industry looks well-poised for growth.
Amid this backdrop, investors could consider buying quality financial services stocks Broadridge Financial Solutions, Inc. (BR), Banco Macro S.A. (BMA), and Yiren Digital Ltd. (YRD) have been showing strong momentum lately and will likely maintain the bullish momentum in the near term.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s going on in the financial services industry.
Digitalization has revolutionized finance, streamlining transaction processes. The sector thrives due to internet expansion, rising smartphone use, and favorable government policies. Now, consumers prefer digital platforms for banking, payments, investments, and insurance, further driving industry growth. The financial services market is projected to grow at a CAGR of 7.6% to reach $44.93 trillion by 2028.
Furthermore, the rising popularity of fintech and the increasing adoption of advanced technologies such as AI, data analytics, blockchain, and cloud-based solutions significantly enhance user experiences and create substantial growth opportunities for consumer finance firms. The global consumer finance market is expected to reach $1.96 trillion by 2029, growing at a CAGR of 7.1%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three financial stocks.
Broadridge Financial Solutions, Inc. (BR)
BR provides investor communications and technology-driven solutions for the financial services industry. It operates through two segments: Investor Communication Solutions and Global Technology and Operations.
On April 14, 2024, BR announced that SBI SECURITIES Co., Ltd. selected its post-trade solution for launching equities brokerage services in the UK through SBI Shinsei International Limited.
This extends their existing partnership for processing Japanese equities transactions in Hong Kong and Singapore. They plan to leverage BR’s Swift Service Bureau to automate Swift messaging workflows with their custodian.
In terms of the trailing-12-month EBITDA margin, BR’s 23.10% is 69.3% higher than the 13.65% industry average. Its 13.39% trailing-12-month levered FCF margin is 101.9% higher than the industry average of 6.63%. Likewise, its 10.82% trailing-12-month net income margin is 83.9% higher than the industry average of 5.88%.
BR’s revenues for the fiscal second quarter that ended December 31, 2023, amounted to $1.41 billion, up 8.7% year-over-year. Its adjusted operating income increased marginally over the prior-year quarter to $174.50 million. In addition, its adjusted net earnings and adjusted earnings per share increased 1.1% each from the year-ago value to $109.60 million and $0.92, respectively.
Street expects BR’s EPS for the quarter ended March 31, 2024, to increase 9.1% year-over-year to $2.24. Its revenue for the same quarter is expected to increase 7.4% year-over-year to $1.77 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 33.4% to close the last trading session at $193.61.
BR’s stock is trading above its 200-day moving average of $188.30.
BR’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #13 out of 97 stocks in the Financial Services (Enterprise) industry. It has a B grade for Momentum and Sentiment. To access BR’s grades for Growth, Value, Stability, and Quality, click here.
Banco Macro S.A. (BMA)
Headquartered in Buenos Aires, Argentina, BMA provides various banking products and services to retail and corporate customers in Argentina. It offers a range of retail banking products and services, including personal loans, document discounts, residential mortgages, overdrafts, pledged loans, and credit card loans to retail customers.
In terms of the trailing-12-month Return on Common Equity, BMA’s 32.27% is 195.6% higher than the 10.92% industry average. Likewise, its 8.74% trailing-12-month Return on Total Assets is 704.1% higher than the 1.09% industry average.
For the fiscal fourth quarter that ended on December 31, 2023, BMA reported net interest income of $183.69 billion, and net fee income rose 4.6% year-over-year to $55.57 billion.
The company’s net operating income grew 223.9% year-over-year to $1.32 trillion. Furthermore, its net income for the period and earnings per average outstanding ADS stood at $459.87 billion and $8.89, up 788.8% and 94.5% year-over-year, respectively.
Analysts expect BMA’s EPS for the quarter ending September 30, 2024, to increase 451.1% year-over-year to $1.82. Its revenue for fiscal 2024 is expected to increase 129.3% year-over-year to $2.86 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past six months, the stock has gained 152.9% to close the last trading session at $48.03.
BMA’s stock is trading above its 50-day and 200-day moving averages of $41.70 and $28.76, respectively.
It’s no surprise that BMA has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value, Momentum, and Quality. Within the Foreign Banks industry, it is ranked first out of 90 stocks. In total, we rate BMA on eight different levels. Beyond what we have stated above, we also have given BMA grades for Stability and Sentiment. Get all the BMA ratings here.
Yiren Digital Ltd. (YRD)
Based in Beijing, the People's Republic of China, YRD operates an AI-powered platform that provides a suite of financial and lifestyle services in China. The company delivers digital financial services, insurance solutions, and consumption and lifestyle services.
In terms of the trailing-12-month EBIT margin, YRD’s 53% is 131.9% higher than the 22.86% industry average. Its 20.24% trailing-12-month Return on Total Assets is considerably higher than the 1.09% industry average. Additionally, its 0.52x trailing-12-month asset turnover ratio is 145.1% higher than the 0.21x industry average.
YRD’s total net revenue for the fourth quarter that ended December 31, 2023, increased 17.1% year-over-year to RMB1.27 billion ($175.40 million). The company’s net income and net income per ADS stood at RMB571.27 million ($78.90 million) and RMB6.51 per share, up 17.7% and 20.3% year-over-year, respectively.
In addition, the company’s adjusted EBITDA came in at RMB684.84 million ($94.59 million), up 6.2% over the prior-year quarter.
Over the past year, YRD’s stock has gained 132.4% to close the last trading session at $4.81.
YRD’s stock is trading above its 100-day and 200-day moving averages of $4.31 and $3.35, respectively.
YRD’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.
It has an A grade for Value and Quality and a B for Sentiment. It is ranked first out of 9 stocks in the B-rated Foreign Consumer Finance industry. To see YRD’s Growth, Momentum, and Stability ratings, 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.
BR shares were trading at $193.04 per share on Wednesday morning, down $0.57 (-0.29%). Year-to-date, BR has declined -5.81%, versus a 6.06% 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.
The post Top 3 Financial Services Stocks With Unstoppable Momentum appeared first on StockNews.com