3 Financial Services Stocks to Maximize Your Returns The growing adoption of digital financial services is expected to drive the long-term growth of the financial services industry. Amid this backdrop, it could be wise to buy fundamentally strong...
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The growing adoption of digital financial services is expected to drive the long-term growth of the financial services industry. Amid this backdrop, it could be wise to buy fundamentally strong financial services stocks Fiserv (FISV), Navient (NAVI), and Medallion Financial (MFIN). Read more….
Digital financial services have brought about a significant transformation to the financial system. The pandemic boosted the adoption of digital financial services. It completely changed how we transacted, saved money, traded, availed credit, etc.
Given the fast-growing demand for digital financial solutions, the financial services industry is well-positioned for long-term growth. Therefore, it could be wise to buy fundamentally strong financial services stocks Fiserv, Inc. (FISV), Navient Corporation (NAVI), and Medallion Financial Corp. (MFIN).
Before diving deeper into the fundamentals of these stocks, let's discuss what's happening in the financial services industry.
During the pandemic, the world recognized the need for digitizing financial services. Traditional financial institutions were caught off guard as they were still stuck with outdated technology, which did not provide the ease of doing seamless digital transactions.
Many financial services companies provide more efficient and consumer-centric solutions than traditional financial institutions. These firms are leveraging technology to provide innovative and convenient financial services like online banking, wealth management, digital payments, consumer credit, etc. With technology becoming a significant part of our lives, the demand for digital financial solutions will likely rise.
According to a Boston Consulting Group and QED Investors report, financial technology revenues are projected to grow sixfold from $245 billion to $1.5 trillion by 2030. Considering these factors, investing in the featured stocks could be wise.
Let's take a closer look at their fundamentals.
Fiserv, Inc. (FISV)
FISV provides account processing and digital banking solutions, card issuer processing and network services, card issue processing and network services, payments, e-commerce, merchant acquiring and processing, and the Clover cloud-based point-of-sale solution and business management platform. The company's segments include Merchant Acceptance, Financial Technology (Fintech), and Payments and Network (Payments).
On February 23, 2023, FISV announced that its Board of Directors had authorized the repurchase of 75 million shares of its common stock. This authorization will not expire. This is expected to create greater shareholder value.
In terms of the trailing-12-month EBIT margin, FISV's 21.71% is 4.7% higher than the 20.74% industry average. Likewise, its 39.09% trailing-12-month EBITDA margin is 91.7% higher than the industry average of 20.40%. Furthermore, the stock's 8.19% trailing-12-month Capex/Sales is 331.9% higher than the industry average of 1.90%.
FISV's total revenue for the first quarter ended March 31, 2023, increased 9.9% year-over-year to $4.55 billion. Its adjusted net income rose 8.1% over the prior-year quarter to $996 million. The company's adjusted EPS came in at $1.58, representing an increase of 12.9% year-over-year. In addition, its adjusted operating income increased 15.1% year-over-year to $1.44 billion.
Analysts expect FISV's EPS and revenue for the quarter ending June 30, 2023, to increase 14.8% and 6.8% year-over-year to $1.79 and $4.52 billion, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 19.7% to close the last trading session at $118.27.
FISV's POWR Ratings reflect this positive outlook. FISV has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #7 out of 100 stocks in the Financial Services (Enterprise) industry. It has a B grade for Growth, Stability, and Sentiment. Click here to see the other ratings of FISV for Value, Momentum, and Quality.
Navient Corporation (NAVI)
NAVI provides technology-enabled education finance and business processing solutions for education, health care, and government clients. It operates through three segments: Federal Education Loans, Consumer Lending, and Business Processing.
In terms of the trailing-12-month gross profit margin, NAVI's 100% is 69.8% higher than the 58.91% industry average. Likewise, its 34.55% trailing-12-month net income margin is 34.2% higher than the industry average of 25.75%. Furthermore, the stock's 17.33% trailing-12-month Return on Common Equity is 56.1% higher than the industry average of 11.10%.
For the first quarter ended March 31, 2023, NAVI's net income margin, the Federal Education Loans segment, came in at 1.12%, compared to 1.04% in the prior-year quarter. Its net interest margin, Consumer Lending Segment, came in at 3.12%, compared to 2.80% in the year-ago quarter. Its adjusted core earnings EPS came in at $1.06, representing an increase of 17.8% year-over-year.
For the quarter ended September 30, 2023, NAVI's EPS is expected to rise 11.2% year-over-year to $0.69. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 0.3% to close the last trading session at $15.34.
NAVI's POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to Buy in our proprietary rating system.
Within the same industry, it is ranked #9. It has a B grade for Value and Quality. To see the other ratings of NAVI for Growth, Momentum, Stability, and Sentiment, click here.
Medallion Financial Corp. (MFIN)
MFIN operates as a finance company. The company operates through four segments: Recreation Lending, Home Improvement Lending, Commercial Lending, and Medallion Lending. It provides loans that finance consumer purchases of recreational vehicles, boats, and trailers; consumer home improvements; commercial businesses; and taxi medallions to individuals and small to mid-size businesses.
In terms of the trailing-12-month gross profit margin, MFIN's 85.96% is 45.9% higher than the 58.91% industry average. Likewise, its 53.72% trailing-12-month EBITDA margin is 163.4% higher than the industry average of 20.40%. Furthermore, the stock's 52.77% trailing-12-month EBIT margin is 154.4% higher than the industry average of 20.74%.
MFIN's net interest income for the first quarter ended March 31, 2023, increased 21.4 % year-over-year to $43.60 million. Its total interest income rose 29% over the prior-year quarter to $55.84 million. Its total net income attributable to MFIN increased 56.1% year-over-year to $15.36 million. In addition, its EPS came in at $0.67, representing an increase of 71.8% year-over-year to $0.67.
Analysts expect MFIN's revenue for the quarter ending June 30, 2023, to increase 13.9% year-over-year to $44.30 million. Its EPS for the quarter ending September 30, 2023, is expected to increase 13.5% year-over-year to $0.36. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 0.5% to close the last trading session at $6.39.
MFIN's POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It is ranked #4 in the Financial Services (Enterprise) industry. To see the other ratings of MFIN for Growth, Momentum, Stability, and Sentiment, click here.
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FISV shares fell $0.39 (-0.33%) in premarket trading Wednesday. Year-to-date, FISV has gained 15.99%, versus a 8.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master's degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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