The financial services industry was among the severely impacted industries last year as weak credit demand, low interest rates, and diminished economic activity reduced the revenues of most industry participants. However…
the industry is rebounding solidly due to increasing investor participation in the capital markets.
Last week, the major market indices hit fresh all-time highs as the Fed Chairman Jerome Powell hinted that an interest rate hike is highly unlikely in the near term. Though this announcement may not be favorable to the financial services sector, rising financial transactions with economic activities returning to pre-pandemic levels should boost the industry’s growth. Furthermore, the federal government’s efforts to relax some capital and liquidity requirements to help accelerate lending should support the industry’s recovery.
With these factors in mind, we believe the shares of established financial companies Jack Henry & Associates Inc. (JKHY – Get Rating), Santander Consumer USA Holdings Inc. (SC – Get Rating), SEI Investments Company (SEIC – Get Rating), and Janus Henderson Group plc (JHG – Get Rating), which have been witnessing strong momentum lately, could be solid bets now.
JKHY primarily serves financial services businesses in the United States with technological solutions and payment processing services. Under the Jack Henry Banking brand, the Monett, Miss.-based company provides information and transaction processing solutions for banks; core data processing solutions for various credit unions under the Symitar brand; and specialized financial performance, imaging and payments processing, information security and risk management, retail delivery, and on-demand services under the ProfitStars brand.
This month, JKHY’s Symitar division announced that long-time client, Keesler Federal Credit Union, had migrated its core to its private cloud environment.
And last month, JKHY expanded its partnership with Autobooks to provide payment and invoicing features in the Banno Digital Platform. With this collaboration, JKHY became the first major financial technology provider to democratize receivables solutions and integrate them into the digital banking experience.
JKHY’s revenue increased 10% year-over-year to $450.29 million in the fourth quarter, ended June 30, 2021. The company’s operating income increased 25% year-over-year to $96.30 million over this period. In addition, its net income increased 25% year-over-year to $76.86 million, while its EPS grew 30% from the prior-year quarter to $1.04.
A $3.99 consensus EPS estimate for the current year represents a 3.4% improvement year-over-year. JKHY also has an impressive earnings surprise history; it beat the consensus EPS estimates in each of the trailing four quarters. The $1.76 billion consensus revenue estimate for the current year represents a 3.6% increase from the same period last year. Over the past year, the stock has returned 6.1%. Also, it has gained 13.1% in price over the past three months.
JKHY’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
JKHY has also rated a B grade for Momentum, Quality, and Stability. In addition, within the Financial Services (Enterprises) industry, it is ranked #15 of 106 stocks.
To see additional POWR Ratings for Growth, Value, and Sentiment for JKHY, click here.
SC is a specialist consumer finance company that offers car financing and third-party services in the United States. It is based in Dallas, Tex. SC provides automotive financial products and services, such as retail installment contracts and car leases, and dealer loans for inventory, construction, working capital, and revolving lines of credit. In addition, it offers private-label loans and leases, as well as personal loans and point-of-sale finance.
Last month, SC launched a new digital auto finance experience that will streamline and improve dealer interactions with SC and SC’s clients. SC’s digital product suite will enable dealers to “self-service” across key vehicle underwriting touchpoints with the company to simply and effectively increase dealers’ capacity to sell automobiles.
During the second quarter…
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