The consumer finance space is experiencing rapid growth due to technology and evolving consumer preferences. Consequently, fundamentally sound consumer finance stocks, Euronet Worldwide, Inc. (EEFT), Synchrony Financial (SYF), and AssetMark Financial Holdings, Inc. (AMK), could make ideal additions to your portfolio.
Before exploring the highlighted stocks, let's analyze the factors propelling the industry's growth.
Consumer financial services companies furnish diverse financial products and services, meeting the needs of individuals, households, and small businesses. Encompassing banking, credit cards, tax preparation, accounting, and wealth management, the sector plays a pivotal role in addressing and managing varied financial requirements.
The pandemic accelerated the embrace of digital payments, with consumer favor steadily rising. McKinsey's 2023 Global Payments Report revealed a 4% global reduction in cash usage last year. Anticipated to persist in 2024, the gradual departure from cash signifies a sustained preference for streamlined and convenient digital payment alternatives.
Juniper Research predicts a global surge in unique contactless mobile payment users, reaching 1 billion by 2024. Furthermore, digital wallet spending is projected to exceed $10 trillion in 2025, marking a substantial $4.5 trillion increment over the span of five years.
Furthermore, the industry is progressively employing generative AI to develop predictive models in credit risk assessment and fraud detection. A prominent application of generative AI is also evident in chatbots, as customers increasingly engage with banking apps and online money services using natural language for communication.
Rising demand for loans from individuals and small businesses, coupled with the manifold advantages offered by consumer lenders, is further propelling market expansion. According to a report by Allied Market Research, the global consumer credit market is projected to reach $24.3 billion by 2032, growing at a CAGR of 7.8%.
In light of these encouraging trends, let’s look at the fundamentals of the three best Consumer Financial Services stocks, beginning with number 3.
Stock #3: Euronet Worldwide, Inc. (EEFT)
EEFT provides innovative payment solutions to financial institutions, retailers, and consumers through its Electronic Fund Transfer Processing; epay; and Money Transfer segments. The company's other services encompass ATM and POS currency conversion, surcharge, customer relationship management, fraud management, and more.
On January 30, EEFT unveiled a multi-year partnership with Banco Guayaquil, a leading Ecuadorian bank. The collaboration focuses on revolutionizing transaction-switching solutions for Visa Inc. (V), Mastercard Incorporated (MA), and American Express Company (AXP) across the bank's extensive network.
The move is poised to positively impact EEFT's growth trajectory, given the significant reach of millions of cards and oversight of millions of monthly transactions.
On November 2, 2023, the company disclosed a multi-year collaboration with Banco Pichincha, Ecuador's largest private bank. The partnership focuses on delivering prepaid and debit card issuing and processing services through a Software as a Service (SaaS) installation of EEFT’s Ren payments platform.
By relying on Ren, Banco Pichincha would elevate operational uptimes, fulfill service level agreements, ensure compliance with regulatory mandates, modernize its payments platform, and introduce innovative products while expanding its regional footprint. This enables EEFT to capitalize on the expanding financial landscape in Ecuador.
For the fiscal 2023 third quarter that ended September 30, 2023, EEFT’s revenues increased 7.8% year-over-year to $1 billion. Its consolidated adjusted EBITDA marginally rose from the year-ago value to $212.50 million. Additionally, net income and EPS attributable to EEFT stockholders grew 6.8% and 9.6% from the prior year’s period to $104.20 million and $2.05, respectively.
The consensus revenue estimate of $3.67 billion for the fiscal year that ended December 2023 exhibits a 9.4% year-over-year rise. Likewise, the consensus EPS estimate of $7.36 for the same period reflects a 13% growth from the prior year. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.
Over the past six months, EEFT has gained 14.9% to close the last trading session at $100.96.
EEFT’s sound outlook is reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
EEFT has a B grade for Momentum. It is ranked #13 out of 46 stocks within the B-rated Consumer Financial Services industry.
In addition to the POWR Ratings I’ve highlighted, you can see EEFT’s Growth, Value, Stability, Sentiment, and Quality ratings here.
Stock #2: Synchrony Financial (SYF)
SYF furnishes diverse credit products, encompassing credit cards, commercial credit, and consumer installment loans. The company extends private-label credit cards, dual cards, co-brand and general-purpose credit cards, and short- and long-term installment loans. Additionally, it provides consumer banking products and deposit offerings.
On January 30, SYF and PatientNow, a leading practice management firm in elective medical services, unveiled an alliance poised to revolutionize payment processes within the cosmetic practice and medical spa sector.
This would amplify patient satisfaction, augment account management functionalities and extend marketing capabilities, positioning SYF for sustained prosperity in the dynamic landscape of elective medical services.
On January 19, SYF unveiled a definitive agreement to acquire Ally's point-of-sale financing business, encompassing $2.2 billion in loan receivables. The move comprises a portfolio boasting connections with nearly 2,500 merchant locations and catering to over 450,000 borrowers in the home improvement services and healthcare realms.
The acquisition marks SYF's foray into a distinctive industry solution, concurrently providing revolving credit and installment loans at the point of sale within the home improvement sector. Furthermore, the transaction would significantly broaden SYF's footprint in burgeoning specialty domains such as roofing, HVAC, and windows, fortifying its market presence and potential for sustained growth.
For the fiscal 2023 fourth quarter that ended December 31, 2023, SYF’s net interest income increased 8.8% year-over-year to $4.47 billion. As of December 31, 2023, the company’s cash and equivalents stood at $14.26 billion, compared to $10.29 billion as of December 31, 2022. Furthermore, its total assets amounted to $117.48 billion, up from $104.56 billion as of December 31, 2022.
Analysts expect SYF’s revenue to increase 8.6% year-over-year to $14.79 billion for the fiscal year ending December 2024. The company’s EPS for the current year is expected to grow 5.3% from the previous year to $5.60. Also, the company topped the consensus revenue estimates in all of the trailing four quarters.
The stock has gained 14.9% over the past six months, closing the last trading session at $39.70.
SYF’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
SYF has a B grade for Growth, Momentum, and Quality. It is ranked #11 out of 46 stocks within the Consumer Financial Services industry.
Click here to access additional SYF ratings for Growth, Stability, and Sentiment.
Stock #1: AssetMark Financial Holdings, Inc. (AMK)
AMK delivers comprehensive wealth management and technology solutions. The company presents an open-architecture product platform, coupled with client advice, asset allocation options, practice management, and support services to financial advisers. It also offers an integrated technology platform for advisers.
In its December AMK Report, the company disclosed a robust financial performance, revealing that its Platform assets reached $108.9 billion by the end of December, marking a 19% year-over-year increase. The report also highlighted a notable surge in net flows, totaling $628 million for the month, an 82% surge compared to the previous year’s period.
The commendable growth underscores AMK's resilience and efficacy in navigating the financial landscape, positioning the company for continued success.
For the fiscal 2023 third quarter that ended on September 29, 2023, AMK’s total revenue increased 23.2% year-over-year to $190.52 million. Its adjusted EBITDA rose 26.2% from the year-ago value to $66.46 million. Also, the company’s adjusted net income and adjusted EPS grew 31.6% and 31.9% from the prior year’s period to $46.02 million and $0.62, respectively.
The consensus revenue estimate of $544.14 million for the fiscal year that ended December 2023 indicates a 19.3% year-over-year growth. Likewise, the consensus EPS estimate of $2.28 for the same period reflects a 28.8% year-over-year increase. AMK shares have gained 17.7% over the past year, closing the last trading session at $31.19.
AMK’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
AMK has an A grade for Momentum and a B for Growth, Stability, and Sentiment. It is ranked #7 within the same industry.
Click here to access the additional AMK ratings (Value and Quality).
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SYF shares were trading at $39.62 per share on Wednesday afternoon, down $0.08 (-0.20%). Year-to-date, SYF has gained 3.74%, versus a 2.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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