The stock market is making new highs, but investors are still pessimistic about the financial sector which has been underperforming the broader market over the last couple of years. The sector’s weakness is evident from the Financial Select Sector SPDR Fund’s (XLF) year-to-date loss of 19% while the S&P 500 index has an 8% gain…
Some reasons are the low-interest-rate environment and weakness in lending due to the slowdown for many industries and small businesses. There’s also concern that defaults on loans and mortgages are going to increase in the coming months. However, some financial stocks are defying this trend.
PennyMac Financial Services, Inc. (PFSI), Goosehead Insurance, Inc. (GSHD), Palomar Holdings, Inc. (PLMR), and Mr. Cooper Group Inc. (COOP) are among the financial stocks that are less exposed to these negative factors and should continue moving higher.
PennyMac Financial Services, Inc. (PFSI)
PFSI provides a comprehensive mortgage platform and integrated business focused on the production and servicing of U.S. mortgage loans and the management of investments related to the mortgage market.
PFSI closed yesterday’s trading session at $50.23, gaining 47.6% year-to-date. The stock has gained more than 55% in the last three months to trade 141% above its 200-day moving average of $35.53. Moreover, PFSI is trading at a 7.8% discount to its all-time high of $55.99.
The second-quarter results did not fail to impress the street. Total revenues grew 171% year-over-year to $821.6 million. The increase was primarily contributed by an increase in mortgage loan origination and refinancing activities on lower mortgage rates.
Consequently, a substantial rise in net gains on loans held for sale at fair value along with higher loan origination fees was witnessed. PFSI generated $1.1 billion as cash flow from operations. The company also repurchased $237 million worth of its common stock during the quarter.
EPS for the quarter came in at $4.39, growing more than 377% year-over-year. This accounted for a positive earnings surprise of 51.9%. Additionally, PFSI has beaten EPS estimates in each of the trailing four quarters. The company also raised its quarterly dividend by 25% to $0.15 per share, aggregating to a yield of 1.17%. Furthermore, EPS is expected to rise 212.5% in the current year.
How does PFSI stack up for the POWR Ratings?
A for Trade Grade
B for Buy & Hold Grade
B for Peer Grade
B for Industry Rank
B for Overall POWR Rating.
It is ranked #32 in the 163-stock Financial Services (Enterprise) industry.
Goosehead Insurance, Inc. (GSHD)
GSHD is a personal lines insurance agency service provider. The company operates through two segments — Corporate Channel and Franchise Channel. It offers various insurance products, such as homeowners’ insurance, auto insurance; and life and business insurance.
GSHD has gained more than…
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