The financial sector thrives thanks to robust demand from individuals and enterprises, resulting in rapid industry growth and innovation. Technology has transformed traditional financial services by enabling personalized, risk-aware, and secure offerings.
Given the industry’s bright prospects, fundamentally strong financial stocks H&R Block, Inc. (HRB), Euronet Worldwide, Inc. (EEFT), and EZCORP, Inc. (EZPW) could be solid additions to your portfolio now.
The financial services industry plays a vital role in the economy's functioning. It helps promote economic growth, maximize returns, and minimize risks. The financial services industry is expected to reach $44.93 trillion by 2028, growing at a CAGR of 7.6%.
Consumer financial services include online banking, credit card processing, insurance, investment and wealth management services, on-demand credit. The global consumer finance market is expected to grow at a 7.2% CAGR, reaching a value of $1.65 trillion by 2030.
The projected increase can be attributed to rising wealth among high-net-worth individuals, expanding demand for alternative investments, and increased adoption of digital platforms for investment purposes. Increasing access to various loans and credits via digital payment platforms creates lucrative growth opportunities for market players.
The financial services technology sector is undergoing a tremendous digital transition. CIOs are prioritizing innovative technologies to improve client experiences and operational efficiency.
Fintech trends, which began with electronic trading and online banking, have grown with advances in AI, machine learning, big data analytics, and blockchain technology, changing risk management, fraud detection, and customer service.
Furthermore, Generative AI transforms financial services by automating processes, improving customer experiences, and generating revenue through personalized financial advice, risk assessment models, and predictive analytics. By 2033, the global generative AI in financial services market is estimated to be worth approximately $10.40 billion, expanding at a CAGR of 28.2%.
Gen AI has the potential to revolutionize how financial institutions operate, allowing for more efficient and accurate decision-making. By harnessing the power of data and machine learning, generative AI is paving the way for a more streamlined and innovative financial industry.
With these favorable trends in mind, let’s delve into the fundamentals of the three Consumer Financial Services stock picks, beginning with the third choice.
Stock #3: H&R Block, Inc. (HRB)
HRB provides assisted income tax return preparation and do-it-yourself (DIY) tax return preparation services and products to the general public in the U.S., Canada, and Australia. The company offers its services through a system of retail offices operated by the company or its franchisees. It also provides Refund Transfers and H&R Block Emerald Prepaid Mastercard.
HRB’s trailing-12-month Return on Total Assets of 21.34% is 405.4% higher than the 4.22% industry average. Its 25.56% trailing-12-month EBITDA margin is 135.2% higher than the 10.87% industry average. Also, its 25.74% trailing-12-month Return on Total Capital is 327% higher than the 6.03% industry average.
For the fiscal second quarter that ended December 31, 2023, HRB’s revenues increased 7.6% year-over-year to $179.08 million. The company’s total financial services revenue rose 6.1% from the year-ago value to $26.94 million. In addition, the company’s total current liabilities were reduced from $938.78 million as of June 30, 2023, to $745.59 million as of December 31, 2023.
Street expects HRB's revenue and EPS for the quarter ending March 31, 2024, to increase 2.1% and 9.9% year-over-year to $2.14 billion and $4.62, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 44.5% to close the last trading session at $48.21.
HRB's POWR Ratings reflect this promising outlook. 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.
HRB has a B grade for Quality. Within the B-rated Consumer Financial Services industry, it is ranked #16 out of 46 stocks. To see HRB's additional ratings for Growth, Value, Momentum, Stability, and Sentiment, click here.
Stock #2: 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 February 13, 2024, EEFT announced the acquisition of Infinitium Holdings Pte. Ltd., a Singapore-based digital payments company that provides risk management and payment authentication services. Infinitium’s products will be incorporated into Euronet’s Ren payments platform, providing extra security against consumer fraud and merchant chargebacks in online transactions.
This acquisition will strengthen Euronet’s position in the digital payments industry and enhance its ability to provide customers with secure and reliable payment solutions worldwide.
EEFT’s trailing-12-month Return on Common Equity of 22.43% is 105.2% higher than the industry average of 10.93%. Its trailing-12-month asset turnover ratio of 0.65x is 211.9% higher than the industry average of 0.21x. Its 2.56% trailing-12-month CAPEX / Sales is 25.4% higher than the 2.04% industry average.
During the fourth quarter that ended December 31, 2023, EEFT’s revenues increased 10.6% year-over-year to $957.70 million. Its consolidated adjusted EBITDA rose 16.2% from the year-ago value to $147.60 million. Additionally, adjusted net income and EPS attributable to EEFT stockholders grew 25% and 35.3% from the prior year’s period to $87.40 million and $1.88, respectively.
For the quarter ending March 31, 2024, EEFT’s EPS and revenue are expected to increase 21.4% and 7.4% year-over-year to $1.06 and $845.63 million, respectively. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 37.3% to close the last trading session at $110.
EEFT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #9 in the same industry. It has an A grade for Growth and a B for Momentum and Sentiment. Click here to see EEFT's additional ratings for Value, Stability, and Quality.
Stock #1: EZCORP, Inc. (EZPW)
EZPW provides pawn services. The company operates through three segments: U.S. Pawn, Latin America Pawn, and Other Investments. It offers pawn loans collateralized by tangible personal property, jewelry, consumer electronics, and musical instruments. The company also sells merchandise, primarily collateral forfeited from pawn lending operations and pre-owned merchandise.
EZPW’s trailing-12-month asset turnover ratio of 0.75x is 259.5% higher than the 0.21x industry average. Likewise, the stock’s trailing-12-month CAPEX / Sales of 3.73% is 82.7% higher than the industry average of 2.04%. It trailing-12-month Return on Total Assets 3.39% is 208.1% higher than the industry average of 1.10%.
EZPW’s total revenues for the first quarter that ended December 31, 2023, increased 13.5% year-over-year to $300 million. Its adjusted gross profit rose 10.7% over the prior-year quarter to $168.80 million. The company’s adjusted net income increased 30.6% year-over-year to $28.20 million. Also, its adjusted EPS came in at $0.36, representing an increase of 28.6% year-over-year.
Analysts expect EZPW’s revenue and EPS for the quarter ending March 31, 2024, to increase 8.8% and 4.4% year-over-year to $281.05 million and $0.24, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Shares of EZPW have gained 36.8% over the past six months to close the last trading session at $10.71.
It’s no surprise that EZPW has an overall A rating, equating to a Strong Buy in our POWR Ratings system.
It has a B grade for Growth, Value, and Momentum. It is ranked #2 in the Consumer Financial Services industry. Beyond what is stated above, we’ve also rated EZPW for Stability, Sentiment, and Quality. Get all EZPW ratings 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.
HRB shares were trading at $47.90 per share on Friday morning, down $0.31 (-0.64%). Year-to-date, HRB has declined -0.31%, versus a 9.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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