Financial services refers to companies that provide services broadly related to insurance, accounting, banking, brokerage, real estate, risk analysis, asset management, and investment. According to…
Research And Markets, the global financial services market is projected to reach $28.53 trillion by 2025, growing at a CAGR of 6% between 2020 – 2026. Investment in big data and further adoption of digitalization are projected to be the key growth drivers for the financial services market.
Moreover, year-to-date (YTD) the financial industry has outperformed the market, as evidenced by the 36.64% increase in the Financial Select Sector SPDR ETF (XLF), compared to SPDR S&P 500 Trust ETF (SPY) 23% gains over the same period.
In this article, I’ll analyze two financial stocks: OneMain Holdings, Inc. (OMF) and Sunlight Financial Holdings Inc. (SUNL). Wall Street analysts predict both companies will see significant gains in the next year.
OneMain Holdings, Inc. (OMF)
Founded in 1920, OneMain Holdings, Inc is a financial service company that engages in consumer finance and insurance activities. Since the beginning of the year, shares of OneMain Holdings, Inc. are up about 10.57%, underperforming its benchmark and the broader market.
On October 26th, the company announced a secondary offering, selling about 10.01 million of its common stock. However, all of the selling shares were held by the company’s shareholders, thus OMF hadn’t received any proceeds. In addition, the company has agreed to purchase 1.87 million of its shares during the offering.
Financial Overview & Valuation
The company’s total revenue for its fiscal third quarter has risen 10.2% YoY to $1.03 billion, standing in line with the Wall Street consensus. Also, the company’s Consumer Insurance segment generated a net income of $316 million, up 7.4% compared to the year-prior quarter. As a result, its Non-GAAP EPS came in at $2.37, beating Wall Street estimates by $0.09. Besides, OneMain Holdings is expected to pay an annual dividend of $2.80 a share, leading to a solid dividend yield of 5.31%, which outpaces the sector’s median threshold by about 2x.
In terms of valuation, the company looks cheap compared to the sector, allowing investors to buy its shares with a higher margin of safety. For instance, OMF trades with a Forward P/E and P/S of 4.91x and 1.72x, respectively. These figures are well below the sector’s median of 11.57x and 3.41x, respectively.
For the fourth quarter, analysts expect OMF’s EPS growth to slow down to $2.33 compared to the year-ago figure of $2.77. However, its top line should advance 6.30% to $903.62 million in Q4.
Analysts have established a “Strong Buy” rating for OMF, with an average price target of $72.67, which is more than 37% higher than where the stock is currently trading.
Sunlight Financial Holdings Inc. (SUNL)
Based in New York, Sunlight Financial Holdings Inc is a point-of-scale finance company that provides financial services to homeowners for the installation of solar systems, batteries, and roofs. The company went public in July this year through a SPAC merger with Spartan Acquisition Corp. II.
Financial Overview & Analysts Estimates
For its fiscal second quarter ended June 30th, 2021, SUNL’s revenue increased 162% year-over-year to $26.9 million. The increase in revenue was driven by a record level of…
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