The financial services industry is thriving, driven by digitization and advanced technology integration. These developments create exciting investment opportunities in fundamentally solid stocks, NerdWallet, Inc. (NRDS), EZCORP, Inc. (EZPW) and Consumer Portfolio Services, Inc. (CPSS). Priced under $20, these stocks combine affordability with significant growth potential.
Digitization has revolutionized the financial sector, enabling consumers to manage accounts and execute transactions effortlessly with a click. The technological leap has reshaped market dynamics, enhancing customer experience while optimizing efficiency for financial institutions.
In parallel, artificial intelligence (AI) is also transforming financial services, becoming a cornerstone for fraud detection, data analysis, and personalized financial solutions. A study by Future Market Insights projects that the global AI in fintech market could reach $58.70 billion by 2034, growing at a CAGR of 15.9%. The growth underscores AI's critical role in modern financial operations.
Plus, the United States financial services market is set for substantial expansion, with a projected size of $116 billion by 2032, growing at CAGR of 7.5%, according to Expert Market Research. These trends highlight the sector's resilience and capacity for innovation, making it a compelling arena for investors.
Now, let us dive deep into the fundamentals of three financial services stocks, starting with #3.
Stock #3: NerdWallet, Inc. (NRDS)
NRDS is a personal finance company that connects individuals and small and mid-sized businesses with financial product providers. The company offers NerdWallet, a consumer-first platform empowering consumers and businesses. Its financial offerings include credit cards, mortgages, insurance, personal loans, and more.
For the fiscal 2024 third quarter that ended September 30, NRDS’ revenue increased 25.2% year-over-year to $191.30 million. Its non-GAAP operating income grew 141.1% from the year-ago value to $22.90 million. Moreover, the company’s adjusted EBITDA rose 39.7% from the prior year’s quarter to $37.30 million.
NRDS’ net income came in at $100 thousand, compared to a net loss of $500 thousand in the previous year’s quarter.
Analysts expect NRDS’ revenue for the fiscal fourth quarter ending December 2024 to increase 25.9% year-over-year to $168.33 million. Its EPS for the same period is expected to come in at $0.01. Moreover, the company surpassed the consensus revenue estimates in three of the four trailing quarters.
Shares of NRDS have surged 20.8% over the past month and 26.2% over the past three months to close the last trading session at $14.46.
NRDS’ robust fundamentals are reflected in its POWR Ratings. 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, each weighted to an optimal degree.
NRDS has an A grade for Quality and a B for Growth and Value. It is ranked #9 among 47 stocks in the B-rated Consumer Financial Services industry.
In addition to the POWR Ratings highlighted above, you can check NRDS’ ratings for Stability, Momentum, and Sentiment here.
Stock #2: EZCORP, Inc. (EZPW)
EZPW is a pawn transaction provider in the United States and Latin America. The company also merchandise, primarily collateral forfeited from lending operations and pre-owned or recycled items. Its three operational segments include U.S. Pawn; Latin America Pawn; and Other Investments.
On September 11, EZPW announced a definitive agreement to acquire 53 pawn stores in Mexico. By expanding its business in Mexico as well as growing its portfolio, the company is opening up new business opportunities and confirming a steady growth potential.
For the fiscal fourth quarter that ended September 30, 2024, EZPW’s total revenues increased 84.8% year-over-year to $294.55 million. Its adjusted EBITDA rose 15% from the year-ago value to $36.70 million.
Additionally, the company’s adjusted net income and adjusted EPS grew 9.2% and 13% from the prior year’s quarter to $18.90 million and $0.26, respectively.
The consensus revenue and EPS estimates of $323.36 million and $0.37 for the fiscal 2025 first quarter ending December 2024 reflect a year-over-year rise of 7.8% and 3.7%, respectively. Also, the company surpassed the consensus revenue estimates in all four trailing quarters.
EZPW’s shares have gained 13.7% over the past six months and 38% over the past year, closing the last trading session at $11.79.
EZPW’s sound prospects are projected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
EZPW has an A grade in Momentum and a B for Growth and Value. It is ranked #8 within the Consumer Financial Services industry.
Click here to access EZPW’s ratings for Stability, Quality, and Sentiment.
Stock #1: Consumer Portfolio Services, Inc. (CPSS)
CPSS is a specialty finance company that provides purchase and service retail automobile contracts to customers of franchised and independent dealers in the sale of new and used vehicles. It provides more than eight distinct financing programs, each tailored with pricing based on the associated credit risk.
On November 4, CPSS announced a partnership with SentiLink, a leading provider of advanced identity verification and fraud detection solutions, to improve its fraud prevention efforts.
With the rise in fraud in the subprime auto sector, the partnership would allow CPSS to detect fraudulent activity early and reduce exposure within its portfolio while also saving the company from losses due to fraud.
For the fiscal 2024 third quarter that ended September 30, CPSS’ revenues increased 9.2% year-over-year to $100.58 million. Its net income and EPS came in at $4.80 million and $0.20, respectively.
Moreover, as of September 30, 2024, CPSS’ cash and cash equivalents stood at $8.07 million, compared to $6.17 million on December 31, 2023. Plus, its total assets amounted to $3.46 billion, up from $2.90 billion on December 31, 2023.
Street expects CPSS’ revenue and EPS for the fiscal year ending December 2025 to increase 17.2% and 212.9% year-over-year to $457.79 million and $2.66, respectively.
Shares of CPSS have gained 11.9% over the past month and 27.5% over the past three months, closing the last trading session at $10.48.
CPSS’ positive fundamentals are mirrored in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
CPSS has an A grade for Momentum and a B for Stability, Value, and Quality. It is ranked #4 out of 85 stocks in the Financial Services (Enterprise) industry.
Click here to see CPSS’ ratings for Sentiment and Growth.
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NRDS shares were trading at $14.16 per share on Friday morning, down $0.40 (-2.75%). Year-to-date, NRDS has declined -3.80%, versus a 24.62% 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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