3 Financial Services Stocks Investors Can Profit From Financial services companies usually benefit in a high-interest rate environment as it helps them boost their profit margins. Moreover, the growing adoption of digital financial services is expected to drive...
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Financial services companies usually benefit in a high-interest rate environment as it helps them boost their profit margins. Moreover, the growing adoption of digital financial services is expected to drive the long-term growth of the financial services industry. Therefore, it could be wise to buy fundamentally strong financial services stocks Everi (EVRI), CPI Card (PMTS), and Jiayin (JFIN). Read more….
Financial services play a vital role in the economy. Banking, investment, insurance, and asset management are some financial services. Given the industry's potential benefit from the current high-interest rate environment, it could be wise to buy fundamentally strong financial services stocks Everi Holdings Inc. (EVRI), CPI Card Group Inc. (PMTS), and Jiayin Group Inc. (JFIN).
Before diving deeper into the fundamentals of these stocks, let's discuss what's happening in the financial services industry.
The pandemic has accelerated the adoption of digital financial services. Digital financial solutions have completely changed how we save money, transact, avail credit, etc. Moreover, given the proliferation of the Internet, financial services are now available to a broader population.
Technology and consumer-centric solutions have enabled financial services companies to provide better services than traditional financial institutions. Increased automation and reduced need for physical infrastructure have drastically reduced the operational costs of financial services providers.
With technological improvements and the growing adoption of digital financial services, the financial services industry is well-positioned for growth. Moreover, financial companies are known to benefit from higher interest rates. Financial services companies will likely benefit in the near term, as rate cuts are not expected to be initiated by the Fed anytime soon.
The financial services market is expected to grow at a CAGR of 7.4% to $33.31 trillion by 2026. Post 2026, the market is expected to grow at a CAGR of 6.3% to reach $45.15 trillion by 2031.
Considering these factors, it could be wise to buy the featured stocks. Let's take a closer look at their fundamentals.
Everi Holdings Inc. (EVRI)
EVRI is a creative entertainment and technology solutions provider for the casino and digital gaming industry. The company operates through two segments: Games and Financial Technology Solutions (Fintech).
On April 11, 2023, EVRI announced that it had entered into a purchase agreement to acquire certain assets of VKGS LLC (Video King) for a cash consideration of approximately $59 million. The acquisition of Video King's assets will complement EVRI's, and it's expected to provide it with an established customer base.
In terms of the trailing-12-month EBIT margin, EVRI's 26.36% is 256.5% higher than the 7.39% industry average. Likewise, its 43.74% trailing-12-month EBITDA margin is 301.3% higher than the industry average of 10.90%. Furthermore, the stock's 14.50% trailing-12-month net income margin is 237.6% higher than the industry average of 4.29%.
EVRI's revenues for the first quarter ended March 31, 2023, increased 14.2% year-over-year to $200.50 million. Its adjusted EBITDA rose 3.2% year-over-year to $92.50 million. The company's cash and cash equivalents increased 8.8% year-over-year to $293.20 million. Also, its adjusted EPS came in at $0.43, representing an increase of 2.4% year-over-year.
Analysts expect EVRI's revenue for the quarter ending June 30, 2023, to increase 5.9% year-over-year to $208.94 million. Its EPS for fiscal 2024 is expected to increase 14.3% year-over-year to $1.22. It surpassed the Street EPS estimates in three of the trailing four quarters. The stock has gained 2.9% year-to-date to close the last trading session at $14.76.
EVRI's POWR Ratings reflect this positive outlook. EVRI 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 #3 out of 101 stocks in the Financial Services (Enterprise) industry. It has an A grade for Quality and a B for Value, Momentum, and Sentiment. Click here to see the other ratings of EVRI for Growth and Stability.
CPI Card Group Inc. (PMTS)
PMTS is involved in designing, producing, personalizing data, packaging, and fulfilling financial payment cards. The company operates through three segments: Debit and Credit, Prepaid Debit, and Other.
In terms of the trailing-12-month net income margin, PMTS' 8.54% is 257.6% higher than the 2.39% industry average. Likewise, its 16.85% trailing-12-month EBIT margin is 259.4% higher than the industry average of 4.69%. Furthermore, the stock's 3.89% trailing-12-month Capex/Sales is 70.1% higher than the industry average of 2.28%.
For the fiscal first quarter ended March 31, 2023, PMTS' total net sales increased 8.5% year-over-year to $120.85 million. Its adjusted EBITDA rose 11.2% over the prior-year quarter to $25.06 million. The company's net income increased 81.2% year-over-year to $10.87 million. In addition, its EPS came in at $0.91, representing an increase of 78.4% year-over-year.
For the quarter ending September 30, 2023, PMTS' EPS is expected to increase 2% year-over-year to $1.03. Its revenue for the same quarter is expected to increase 7.8% year-over-year to $134.30 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 66.9% to close the last trading session at $26.96.
PMTS' POWR Ratings reflect solid prospects. It has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
Within the same industry, it is ranked #2. It has a B grade for Value and Sentiment. To see the other ratings of Growth, Momentum, Stability, and Quality, click here.
Jiayin Group Inc. (JFIN)
Headquartered in Shanghai, the People's Republic of China, JFIN provides online consumer finance services in China. The company operates a fintech platform facilitating transparent, secure, and fast connections between individual borrowers and financial institutions' funding partners.
On April 6, 2023, JFIN announced it would sell its 100% equity interest in Fuzhou Zhuoqun Jieneng Information Technology Co., Ltd. for RMB395 million.
In terms of the trailing-12-month gross profit margin, JFIN's 82.72% is 40.4% higher than the 58.91% industry average. Likewise, its 36.44% trailing-12-month EBITDA margin is 78.6% higher than the industry average of 20.40%. Furthermore, the stock's 36.13% trailing-12-month EBIT margin is 74.2% higher than the industry average of 20.74%.
JFIN's net revenue for the fourth quarter ended December 31, 2022, increased 186.4% year-over-year to RMB1.05 billion ($148.80 million). Its net income attributable to JFIN rose 330.9% over the prior-year quarter to RMB532.94 million ($75.52 million).
The company's EPS came in at RMB2.49, representing an increase of 336.8% year-over-year. Also, its total comprehensive income attributable to JFIN increased 332.8% year-over-year to RMB528.64 million ($74.91 million).
Over the past year, the stock has gained 194.6% to close the last trading session at $4.95.
JFIN's POWR Ratings reflect this positive outlook. It has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
It is ranked first in the Financial Services (Enterprise) industry. It has an A grade for Growth and a B for Value, Sentiment, and Quality. Click here to see the other ratings of JFIN for Momentum and Stability.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today's volatile markets:
EVRI shares were trading at $14.76 per share on Thursday morning, down $0.00 (0.00%). Year-to-date, EVRI has gained 2.86%, versus a 8.42% 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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