Financial institutions play a critical role, offering everything from consumer banking to wealth management and specialized financial solutions. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have caused the industry to lag recently as financials stocks have collectively shed 4.6% over the past six months. This performance was worse than the S&P 500’s 1.8% decline.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Keeping that in mind, here is one financials stock boasting a durable advantage and two we’re passing on.
Two Financials Stocks to Sell:
Carlyle (CG)
Market Cap: $17.4 billion
Founded in 1987 with just $5 million in capital and named after the iconic New York hotel where the founders first met, The Carlyle Group (NASDAQ: CG) is a global investment firm that raises, manages, and deploys capital across private equity, credit, and investment solutions.
Why Are We Hesitant About CG?
- Annual revenue growth of 7% over the last two years was below our standards for the financials sector
At $48.55 per share, Carlyle trades at 10.5x forward P/E. Dive into our free research report to see why there are better opportunities than CG.
OneMain (OMF)
Market Cap: $6.56 billion
Dating back to 1912 and formerly known as Springleaf, OneMain Holdings (NYSE: OMF) provides personal loans, auto financing, and credit cards to nonprime consumers who have limited access to traditional banking services.
Why Do We Think Twice About OMF?
- Sales trends were unexciting over the last five years as its 4.9% annual growth was below the typical financials company
- Incremental sales over the last five years were less profitable as its 1.8% annual earnings per share growth lagged its revenue gains
OneMain is trading at $56.05 per share, or 7.3x forward P/E. To fully understand why you should be careful with OMF, check out our full research report (it’s free).
One Financials Stock to Buy:
Shift4 (FOUR)
Market Cap: $3.42 billion
Starting as a payment gateway provider in 1999 and now processing over $200 billion in annual payment volume, Shift4 Payments (NYSE: FOUR) provides integrated payment processing solutions and software that help businesses accept and manage transactions across in-store, online, and mobile channels.
Why Will FOUR Outperform?
- Annual revenue growth of 27.7% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales significantly boosted profitability as its annual earnings per share growth of 36.1% over the last two years outstripped its revenue performance
- Industry-leading 14.2% return on equity demonstrates management’s skill in finding high-return investments
Shift4’s stock price of $42.03 implies a valuation ratio of 7.2x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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