The consumer financial services industry is well-positioned for growth with rising digital use, AI advancements, and a push for seamless mobile experiences. In addition, government policies are improving regulatory analysis and transparency, enhancing stability and growth. This creates a strong environment for investing in consumer financial services.
Therefore, investors could consider buying fundamentally strong financial stocks such as Enova International, Inc. (ENVA), Synchrony Financial (SYF), and World Acceptance Corporation (WRLD), which have attractive valuations.
The financial services industry is pivotal for the economy. Despite challenges like rising interest rates and geopolitical tensions, the industry is adjusting and bringing stability this year. This creates a favorable climate for lending and refinancing, boosting the sector. Hence, the global consumer finance market is expected to reach $1.96 trillion by 2029, growing at a CAGR of 7.1%.
Digital accessibility, internet penetration, rising incomes, and growing credit needs are driving sector growth. By adopting AI technologies, financial services companies are enhancing fraud detection, risk management, investment strategies, customer support, and revenue tracking. This leads to improved efficiency and satisfaction. The market is projected to grow at a CAGR of 7.6% to $44.93 trillion by 2028.
Furthermore, consumer financial services have been revolutionized by fintech innovations. Fintech simplifies lending, savings, deposits, bill payments, and money transfers, increasing consumer spending by improving access to credit and financial management. This year, the fintech market is set to exceed $340 billion and is projected to reach $1.15 trillion by 2032, with a CAGR of 16.5%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Consumer Financial Services picks, beginning with the third choice.
Stock #3: Enova International, Inc. (ENVA)
ENVA is a technology and analytics company that provides online financial services internationally. The company offers installment loans, line of credit accounts, CSO programs, and bank programs.
In terms of forward non-GAAP P/E, ENVA’s 9.03x is 23.1% lower than the 11.75x industry average. Similarly, its 0.78x forward Price/Sales is 72.2% lower than the 2.82x industry average.
For the first quarter that ended March 31, 2024, ENVA’s revenues increased 26.2% year-over-year to $609.89 million. Its adjusted EBITDA grew 18.5% from the year-ago value to $149.02 million.
ENVA’s income from operations stood at $130.79 million, an increase of 19.7% from the previous year’s quarter. In addition, the company’s adjusted earnings were $56.31 million, while its adjusted EPS was $1.91, up 6.7% year-over-year.
Analysts expect ENVA’s EPS and revenue for the quarter ended June 30, 2024, to increase 20.6% and 24.7% year-over-year to $2.07 and $622.93 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. ENVA’s stock has gained 59.3% over the past nine months to close the last trading session at $73.59.
ENVA’s POWR Ratings reflect strong prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value. It is ranked #14 out of 45 stocks in the Consumer Financial Services industry. Beyond what we stated above, we also have given ENVA grades for Growth, Momentum, Stability, Sentiment, and Quality. Get all of ENVA’s ratings here.
Stock #2: Synchrony Financial (SYF)
SYF and its subsidiaries operate as a consumer financial services company in the United States. They provide credit products such as credit cards, commercial credit products, and consumer installment loans.
On June 4, 2024, SYF announced a partnership with Installation Made Easy (IME) to offer financing options for kitchen, bath, and flooring installations, allowing homeowners to pay over time. This collaboration aims to streamline the home improvement process by integrating financing and professional installation services.
On May 22, 2024, SYF and Mastercard announced a multi-year partnership with Virgin Red to launch the Virgin Red Rewards World Elite Mastercard, allowing cardholders to earn Virgin Points on travel and everyday purchases. The program will launch in the second half of 2024.
In terms of forward Price/Sales, SYF’s 1.29x is 54% lower than the 2.82x industry average. Its 0.23x forward non-GAAP PEG is 81.5% lower than the 1.23x industry average. Moreover, its 8.79x forward non-GAAP P/E is 25.1% lower than the 11.75x industry average.
SYF’s net interest income for the second quarter ended June 30, 2024, increased 6.9% year-over-year to $4.41 billion. Its net earnings available to common stockholders rose 11.6% from the year-ago value to $624 million. Similarly, its EPS increased 17.4% year-over-year to $1.55. Moreover, the company’s cash and equivalents increased 46.6% over the prior-year quarter to $18.63 billion.
For the quarter ending September 30, 2024, SYF’s EPS and revenue are expected to increase 22.42% and 7.82% year-over-year to $1.81 and $3.75 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 78.1% to close the last trading session at $50.52.
SYF’s POWR Ratings reflect a favorable outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. It is ranked #6 in the same industry. To see SYF’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #1: World Acceptance Corporation (WRLD)
WRLD is a consumer finance company in the United States. The company offers short-term small installment loans, medium-term larger installment loans, related credit insurance, and ancillary products and services to individuals. It also provides automobile club memberships to its borrowers, as well as income tax return preparation and electronic filing services.
In terms of forward EV/Sales, WRLD is trading at 2.31x, which is 28.1% lower than the 3.21x industry average. Likewise, its 10.34x forward non-GAAP P/E is 12% lower than the 11.75x industry average. Also, its 1.33x forward Price/Sales is 52.7% lower than the 2.82x industry average.
WRLD’s total revenues for the fiscal year ended March 31, 2024, amounted to $573.21 million. Its interest and fee income stood at $468.53 million. The company’s net income rose 264.3% year-over-year to $77.35 million. Additionally, its EPS came in at $13.19, up 266.4% over the prior-year quarter.
Analysts expect WRLD’s EPS and revenue for the quarter ended June 30, 2024, to increase 4.3% and 1.2% year-over-year, reaching $1.69 and $141 million, respectively. It has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 27.1% to close the last trading session at $141.52.
WRLD’s POWR Ratings reflect its bright prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value. It is ranked #3 in the Consumer Financial Services industry. To access the additional ratings of WRLD for Growth, Momentum, Stability, and Sentiment, 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.
SYF shares were trading at $50.88 per share on Tuesday afternoon, up $0.36 (+0.71%). Year-to-date, SYF has gained 34.84%, versus a 17.50% 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.
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