The recent Fed interest rate cut has strongly uplifted the U.S. financial market outlook. The financial market, which plays an integral part in the operations of the economy, is currently fueled by the rapid adoption of digital technologies and increased demand for financial services.
Thus, against this backdrop, it could be wise to consider currently undervalued financial stocks Synchrony Financial (SYF), Hamilton Insurance Group, Ltd. (HG), and CNB Financial Corporation (CCNE) for potential returns.
The U.S. central bank announced the much-anticipated interest rate cut with a larger-than-usual half-percentage-point reduction. Federal Reserve Chair Jerome Powell said, "We made a good, strong start, and I am very pleased that we did." The rate reduction will benefit various industries, especially the financial sector.
Lower interest rates should make financing and loans easier for consumers and result in earning boosts for financial institutions and other financial companies. It should also open various opportunities in the financial services market, insurance services, and banks.
The United States financial services market size is projected to attain a value of $115.99 billion by 2032, exhibiting growth at a CAGR of 7.5% propelled by the global economic growth, increasing disposable income, and increasing demand for financial services.
The global banking and financial services market is expected to grow at a CAGR of 7.9 until 2030. The growing use of digital channels and technological solutions in the sector, like digitalization, mobile banking, UPI payments, blockchain, artificial intelligence (AI), robotics, and other technologies, will navigate the global industry.
Given the industry’s robust outlook, investing in quality financial stocks such as SYF, HG, and CCNE could be wise for future gains.
Synchrony Financial (SYF)
SYF operates as a consumer financial services company. The company provides credit products, including credit cards, commercial credit products, and consumer installment loans. It also offers private-label credit cards, dual co-brand and general-purpose credit cards, short- and long-term installment loans, and consumer banking products.
SYF’s forward non-GAAP P/E of 8.49x is 27.8% lower than the industry average of 11.75x. Further, the stock’s forward Price/Sales multiple of 1.27 is 54.8% lower than the industry average of 2.81. And its forward Price/Book of 1.29x is 10.3% lower than the 1.17x industry average.
On September 18, SYF and Albertsons Companies, Inc., a leading food and drug retailer, announced the acceptance of the CareCredit health and wellness credit card in nearly 2,200 Albertsons Cos. stores, including Albertsons, Safeway, Vons, ACME, Shaw's and Jewel-Osco.
This will expand SYF’s reach and give customers more options, flexibility, and convenient ways to access prescriptions, personal, pet, and baby care essentials, over-the-counter products, and other necessary items.
On June 4, SYF partnered with Installation Made Easy to simplify the financing for kitchen, bath, and flooring installations for homeowners. This allows homeowners to buy materials from Floor & Decor, schedule installation via IME, and pay for their entire project over time using Floor & Decor cards, streamlining the entire home improvement process and making upgrades.
During the second quarter that ended June 30, 2024, SYF’s net interest income grew 6.9% from the year-ago value to $4.41 billion, while its net revenue rose 12.7% year-over-year to $3.71 billion. Net earnings available to common stockholders and EPS came in at $624 million and $1.55, up 11.6% and 17.4% from the prior year’s quarter, respectively.
Furthermore, the company’s cash and equivalents stood at $18.63 billion as of June 30, 2024, versus $14.26 billion as of December 31, 2023.
Street expects SYF’s EPS and revenue for the third quarter (ended September 2024) to increase 21.4% and 7.6% year-over-year to $1.80 and $3.74 billion, respectively. Further, the company has surpassed the consensus revenue estimates in all of the trailing four quarters.
Over the past six months, the stock has gained 20.3% and 70.3% over the past year to close the last trading session at $49.56.
SYF’s POWR Ratings reflect this solid outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SYF has a B grade for Value, Momentum, and Quality. It is ranked #15 out of 46 stocks in the B-rated Consumer Financial Services industry.
In addition to the POWR Ratings we’ve stated above, we also have other SYG ratings for Growth, Sentiment, and Stability. Get all SYF ratings here.
Hamilton Insurance Group, Ltd. (HG)
Headquartered in Pembroke, Bermuda, HG offers underwriting specialty insurance and reinsurance risks internationally. The company operates Hamilton Global Specialty, Hamilton Select, and Hamilton Re underwriting platforms. It offers casualty reinsurance products, property reinsurance and insurance, and specialty reinsurance solutions.
In terms of forward EV/Sales, HG is trading at 0.52x, 82.9% lower than the industry average of 3.07x. Similarly, the stock’s forward EV/EBIT multiple of 1.65 is 85.5% lower than the industry average of 11.36. Also, its forward Price/Sales of 0.90x is 68.1% lower than the industry average of 2.81x.
During the second quarter that ended June 30, 2024, HG’s net premium earned increased 26.3% year-over-year to $418.76 million, and its total revenues grew 64.6% from the year-ago value to $587.94 million. Net income attributable to common shareholders came in at $131.08 million and $1.20 per share, up 256.3% and 242.8% from the year-ago value, respectively.
Street expects HG’s revenue for the fiscal year (ending December 2024) to increase 34.6% year-over-year to $2.11 billion and its EPS for the same year is expected to improve 64.7% year-over-year to $4.02.
Over the past six months, HG’s stock has gained 40% to close the last trading session at $18.62.
HG’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
The stock has an A grade for Value, Momentum, and Sentiment. Within the A-rated Insurance - Reinsurance industry, HG has topped among the nine stocks.
Click here to access additional HG ratings for Stability, Quality, and Growth.
CNB Financial Corporation (CCNE)
CCNE operates as the bank holding company for CNB Bank, providing banking products and services to individual, business, governmental, and institutional customers. The company accepts checking, savings, and time deposit accounts, and offers real estate, commercial, industrial, residential, and consumer loans, and other specialized financial services.
CCNE’s non-GAAP P/E of 9.98x is 15.1% lower than the industry average of 11.75x. Likewise, the stock’s forward Price/Book multiple of 0.86 is 26.2% lower than the industry average of 1.17.
On August 13, CCNE’s Board of Directors declared a quarterly cash dividend of $0.18 per share of common stock paid on September 13, 2024, to common stock shareholders of record as of August 30, 2024.
CCNE pays an annual dividend of $0.72, which translates to a yield of 3.21% at the current share price. Its four-year average dividend yield is 3.13%. Moreover, the company’s dividend payouts have increased at a CAGR of 1.2% over the past three years.
For the second quarter that ended June 30, 2024, CCNE reported net interest income of $45.72 million, up 1.1% year-over-year. Its income before income taxes grew 3.7% from the year-ago value to $16 million. Its net income and EPS stood at $12.96 million and $0.56, up 2.8% and 1.8% from the prior year’s quarter, respectively.
Analysts expect CCNE’s EPS for the first quarter (ending March 2025) to increase 3.6% year-over-year to $0.57. For the fiscal year 2025, the company’s EPS is expected to grow 10% year-over-year to $2.47. Moreover, the company surpassed the consensus EPS estimates in all of the trailing four quarters.
CCNE’s stock has surged 13.7% over the past six months and 26.5% over the past year to close the last trading session at $22.40.
CCNE’s POWR Ratings reflect its bright prospects. CCNE has a B grade for Stability, Momentum, Sentiment, and Value. The stock is ranked #4 among 35 stocks in the Mid-Atlantic Regional Banks industry.
To access CCNE’s other ratings for Growth and Quality, click here.
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SYF shares were trading at $51.34 per share on Friday afternoon, up $1.78 (+3.59%). Year-to-date, SYF has gained 36.82%, versus a 21.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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