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.

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 Wednesday, May 22, 2024. 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.

Orix Corp (ADR)’s Value Grade

Value Grade:

ORIX Corp is a Japan-based company mainly engaged in the provision of diversified financial services. The Company operates through ten business segments: Corporate Sales/Maintenance Lease, Real Estate, Banking and Credit, Business Investment/Concession, Environmental Energy, Insurance, Banking and Credit, Transportation Equipment, ORIX USA, ORIX Europe, and Asia/Australia. The Corporate Sales/Maintenance Lease segment engages in the finance and commission business, and the leasing and rental of automobiles, electronic measuring instruments, IT-related equipment. The Real Estate segment engages in the development, lease, management, facility operation and asset management of real estate. The Environmental Energy segment engages in domestic and overseas renewable energy, electric power retailing, energy saving services, solar panels and storage batteries sales, waste disposal. The Company is also engaged in the research and development, manufacture and sale of cosmetics and health foods.

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.

Orix Corp (ADR) has a Value Score of 85, which is considered to be undervalued.

When you look at Orix Corp (ADR)’s price-to-sales ratio at 1.38 compared to the industry median at 1.24, this company has a higher price relative to revenue compared to its peers. This could make Orix Corp (ADR)’s stock less attractive for value investors.

Orix Corp (ADR)’s price-earnings ratio is 11.26 compared to the industry median at 10.29. This means it has a higher share price relative to earnings compared to its peers. This could make Orix Corp (ADR) less attractive for value investors.

Now, let’s assess Orix Corp (ADR)’s EV/EBITDA ratio, also known as enterprise multiple. At 9.9, when compared to the industry median of 14.4, 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. Orix Corp (ADR)’s shareholder yield is higher than its industry median ratio of 1.54%. 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. Orix Corp (ADR)’s price-to-book ratio is lower than its industry median ratio of 1.00. This could make Orix Corp (ADR) more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Orix Corp (ADR)’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Orix Corp (ADR)’s price-to-free-cash-flow ratio is higher than its industry median ratio of 3.47. This could make Orix Corp (ADR) less attractive because the higher P/FCF ratio indicates that Orix Corp (ADR) 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.

LM Funding America Inc’s Value Grade

Value Grade:

LM Funding America, Inc. together with its subsidiaries, is a cryptocurrency mining and technology-based specialty finance company. Its segments include Specialty Finance and Mining Operations. It offers funding to nonprofit community associations (Associations) primarily located in the state of Florida. It provides incorporated nonprofit community associations. Its original product offering consists of providing funding to Associations by purchasing their rights under delinquent accounts that are selected by the Associations arising from unpaid Association assessments. In addition to its original product offering, the Company also purchase accounts on varying terms to suit each Association’s financial needs, including under its New Neighbor Guaranty program. Under New Neighbor Guaranty program, an Association assigns substantially all of its outstanding indebtedness and accruals on its delinquent units to the Company in exchange for payment of monthly dues on each delinquent unit.

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.

LM Funding America Inc has a Value Score of 73, which is considered to be undervalued.

LM Funding America Inc’s price-to-book ratio is higher than its peers. This could make LM Funding America Inc less attractive for value investors when compared to the industry median at 1.00.

You can read more about LM Funding America 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.

Mogo Inc’s Value Grade

Value Grade:

Mogo Inc. is a Canada-based digital finance company. The Company provides simple digital solutions to help them in building wealth and achieve financial freedom. Its trade app, MogoTrade, offers lowest cost way to invest while making a positive impact with every investment. The Company 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 70, 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 1.00.

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.

CPI Card Group Inc’s Value Grade

Value Grade:

CPI Card Group Inc. is a payments technology company and provider of comprehensive financial payment card solutions in the United States. The Company’s segments include Debit and Credit, Prepaid Debit and Other. The Debit and Credit segment produces financial payment cards and provides integrated card services, including digital services, for card-issuing financial institutions and fintechs primarily in the United States. Products produced by this segment include EMV and non-EMV Financial Payment Cards, including contact and contactless (dual interface) cards and plastic and encased metal cards, and Second Wave payment cards featuring a core made with ROBP, and other private label credit cards that are not issued on the networks of the Payment Cards Brands. The Prepaid Debit segment primarily provides integrated prepaid card services to Prepaid Debit Card providers in the United States, including tamper-evident security packaging. This segment also produces financial payment cards.

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.

CPI Card Group Inc has a Value Score of 81, which is considered to be undervalued.

CPI Card Group Inc’s price-earnings ratio is 16.5 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes CPI Card Group Inc less attractive for value investors.

You can read more about CPI Card Group 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.

Regional Management Corp’s Value Grade

Value Grade:

Regional Management Corp. is a diversified consumer finance company. The Company provides installment loan products primarily to customers with limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. Its products include small and large installment loans. It provides its customers optional payment and collateral protection insurance. It offers small installment loans with cash proceeds to customers ranging from $500 to $2,500, with terms of up to 48 months. It offers large installment loans with cash proceeds to customers ranging from $2,501 to $25,000, with terms between 18 and 60 months. It offers its customers optional payment and collateral protection insurance relating to its loan products, including credit life insurance, accident and health insurance, involuntary unemployment insurance, and personal property insurance. The Company also offers indirect retail installment loans of up to $7,500. It operates under the name Regional Finance.

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.

Regional Management Corp has a Value Score of 86, which is considered to be undervalued.

Regional Management Corp’s price-earnings ratio is 12.3 compared to the industry median at 10.3. This means that it has a higher price relative to its earnings compared to its peers. This makes Regional Management Corp less attractive for value investors.

Regional Management Corp’s price-to-book ratio is higher than its peers. This could make Regional Management Corp less attractive for value investors when compared to the industry median at 1.00.

You can read more about Regional Management Corp’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.

• Orix Corp (ADR) stock has a Value Grade of A.
• LM Funding America Inc stock has a Value Grade of B.
• Mogo Inc stock has a Value Grade of B.
• CPI Card Group Inc stock has a Value Grade of A.
• Regional Management Corp 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 Wednesday, May 22
• 3 Undervalued Consumer Lending Stocks for Tuesday, May 21
• Why Guild Holdings Co’s (GHLD) Stock Is Up 10.74%
• Why Yiren Digital Ltd - ADR’s (YRD) Stock Is Down 4.18%

AAII Disclaimer

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