Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 5 stocks made the list for top value stocks in the Consumer Lending industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Consumer Lending Stock News

Before choosing which top Consumer Lending stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

There is a neutral forecast for the consumer lending sector. In contrast to organizations that target subprime customers, the outlook is favorable for businesses with a prime and wealthy customer base. In addition, consumers amassed $87.3 billion in new credit card debt in 2021, significantly more than the $48.5 billion 10-year average, according to WalletHub's Credit Card Debt Study. It is expected that loan growth will continue to be high in 2022 as consumers use down their extra savings and government aid continues to be phased out. In 2022,  net revenue is expected to expand due to increasing net interest income. Expanding net interest margins and loan expansion are two factors believes to benefit net interest income. As a result of multi-decade high inflation, the Fed could increase interest rates several more times in 2022–2023. The S&P Consumer Finance sub-industry was down 21.2% year to date as of July 1 compared to a 17.9% decline in the Financials sector as a whole and a 19.7% decline in the S&P 1500 Index. In 2021, the subsector increased by 34.7%, the Financials sector increased by 32.0%, and the S&P 1500 Index increased by 26.7%.

Why Focus on Undervalued Consumer Lending Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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5 Undervalued Consumer Lending Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 5 undervalued stocks in the Consumer Lending industry for Friday, December 08, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Consumer Lending industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Ally Financial Inc’s Value Grade

Value Grade:

Ally Financial Inc. is a digital financial-services company. The Company's segments include Automotive Finance operations, Insurance operations, Mortgage Finance operations, and Corporate Finance operations. The Automotive Finance operations segment provides services, such as providing retail installment sales contracts, loans, and operating leases, and offering term loans to dealers. The Insurance operations segment offers consumer finance protection and insurance products sold through the automotive dealer channel, and commercial insurance products sold directly to dealers. The Mortgage Finance operations segment includes its direct-to-consumer Ally Home mortgage offering and bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties. The Corporate Finance operations segment provides senior secured leveraged asset-based and cash flow loans to United States-based middle-market companies, with a focus on businesses owned by private equity sponsors.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Ally Financial Inc has a Value Score of 93, which is considered to be undervalued.

When you look at Ally Financial Inc’s price-to-sales ratio at 0.66 compared to the industry median at 0.97, this company has a lower price relative to revenue compared to its peers. This could make Ally Financial Inc’s stock more attractive for value investors.

Ally Financial Inc’s price-earnings ratio is 8.03 compared to the industry median at 8.53. This means it has a lower share price relative to earnings compared to its peers. This could make Ally Financial Inc more attractive for value investors.

Now, let’s assess Ally Financial Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 9.0, when compared to the industry median of 14.9, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Ally Financial Inc’s shareholder yield is higher than its industry median ratio of 1.00%. Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Ally Financial Inc’s price-to-book ratio is lower than its industry median ratio of 0.88. This could make Ally Financial Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Ally Financial Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Ally Financial Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 3.41. This could make Ally Financial Inc fairly attractive because the higher P/FCF ratio indicates that Ally Financial Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Mogo Inc’s Value Grade

Value Grade:

Mogo Inc. is a Canada-based digital finance company. The Company provides digital solutions to help consumers get in control of their financial health. Through the Mogo application (app), consumers can access a digital spending account with Mogo Visa Platinum Prepaid Card featuring automatic carbon offsetting, monthly credit-score monitoring and identity (ID) fraud protection, and access to personal loans and mortgages. Its MogoTrade app offers commission-free stock trading that helps users to make an investment. The Company, together with its subsidiary Moka, offers automated, fully managed flat fee investing to Canadians. It also offers digital loans and mortgages. Through its wholly owned subsidiary, Carta Worldwide, the Company also offer a digital payments platform that powers card programs for both established global corporations and fintech companies in Europe and Canada.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Mogo Inc has a Value Score of 65, which is considered to be undervalued.

Mogo Inc’s price-to-book ratio is higher than its peers. This could make Mogo Inc less attractive for value investors when compared to the industry median at 0.88.

You can read more about Mogo Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Nicholas Financial Inc’s Value Grade

Value Grade:

Nicholas Financial, Inc. is a holding company, which conducts its business activities through a wholly owned subsidiary, Nicholas Financial, Inc. (NFI). NFI is a specialized consumer finance company, which is engaged primarily in acquiring and servicing automobile finance installment contracts (Contracts) for purchases of used and new automobiles and light trucks. Additionally, Nicholas Financial sells consumer-finance-related products. Nicholas Data Services, Inc. (NDS), is a second subsidiary of the Company and it serves as the intermediate holding company for Nicholas Financial. The Company is engaged in the business of providing financing programs, primarily to purchasers of used cars and light trucks who meet the Company’s credit standards but who do not meet the credit standards of traditional lenders, such as banks and credit unions. The Company provides automobile finance programs across Florida, Indiana, Kentucky, North Carolina, Ohio, and South Carolina.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Nicholas Financial Inc has a Value Score of 66, which is considered to be undervalued.

Nicholas Financial Inc’s price-to-book ratio is higher than its peers. This could make Nicholas Financial Inc less attractive for value investors when compared to the industry median at 0.88.

You can read more about Nicholas Financial Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Sentage Holdings Inc’s Value Grade

Value Grade:

Sentage Holdings Inc is a financial service provider that offers a comprehensive range of financial services across consumer loan repayment and collection management, loan recommendation, and prepaid payment network services in China. The Company's main businesses are divided into three reporting segments. Consumer Loan Repayment and Collection Management Services segment, Pursuant to service agreements entered with individual customers, the Company monitors and manages the repayment and collection process of outstanding loans for a fixed service fee; Loan Recommendation Services segment, the Company engaged in making loan product recommendations to borrower applicants based on their specific needs, and processing paperwork related to borrowers’ applications; and Prepaid Payment Network Services segment, issuing generic and branded prepaid gift and debit cards and providing related services to various merchants, such as supermarkets and department stores.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Sentage Holdings Inc has a Value Score of 73, which is considered to be undervalued.

Sentage Holdings Inc’s price-to-book ratio is higher than its peers. This could make Sentage Holdings Inc less attractive for value investors when compared to the industry median at 0.88.

You can read more about Sentage Holdings Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Synchrony Financial’s Value Grade

Value Grade:

Synchrony Financial is a consumer financial services company that is focused on delivering digitally enabled product suites. The Company, through its subsidiary, Synchrony Bank (the Bank), offers private label, dual card, co-brand and general-purpose credit cards, as well as short- and long-term installment loans, and savings products. It offers a range of deposit products, such as certificates of deposit, individual retirement accounts, money market accounts and savings accounts. It also takes deposits at the Bank through third-party securities brokerage firm that offer its insured deposit products to their customers. It provides label and co-branded credit cards, and installment loans to retailers. It offers financing programs across key industries, including digital, health and wellness, retail, home, auto, powersports, jewelry, and pets. It offers its credit products through five sales platforms: Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Synchrony Financial has a Value Score of 98, which is considered to be undervalued.

Synchrony Financial’s price-earnings ratio is 6.5 compared to the industry median at 8.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Synchrony Financial more attractive for value investors.

Synchrony Financial’s price-to-book ratio is lower than its peers. This could make Synchrony Financial more attractive for value investors when compared to the industry median at 0.88.

You can read more about Synchrony Financial’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Consumer Lending Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Consumer Lending stocks as well as other industrys.

Choosing Which of the 5 Best Consumer Lending Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Ally Financial Inc stock has a Value Grade of A.
• Mogo Inc stock has a Value Grade of B.
• Nicholas Financial Inc stock has a Value Grade of B.
• Sentage Holdings Inc stock has a Value Grade of B.
• Synchrony Financial stock has a Value Grade of A.

Now that you have a bit more background about each of the 5 undervalued stocks in the Consumer Lending industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Consumer Lending Stocks

Want to learn more about Consumer Lending stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 5 Undervalued Consumer Lending Stocks for Friday, December 08
• What You Need to Know About Aaron's Company Inc's Q3 Earnings
• What You Need to Know About Ally Financial Inc's Q3 Earnings
• What You Need to Know About American Express Company's Q3 Earnings

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