Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 4 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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4 Undervalued Consumer Lending Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 4 undervalued stocks in the Consumer Lending industry for Tuesday, June 04, 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.

Bread Financial Holdings Inc’s Value Grade

Value Grade:

Bread Financial Holdings, Inc. is a tech-forward financial services company. The Company is engaged in providing simple, personalized payment, lending, and saving solutions. The Company through its data insights and white-label technology, it delivers a comprehensive product suite, including private label and co-brand credit cards and buy now, pay later products (split-pay). It also offers direct-to-consumer solutions that give customers more access, and freedom through its branded Bread Cashback American Express Credit Card and Bread Savings products. The Company offers both direct-to-consumer retail deposit products as well as deposits sourced through contractual arrangements with various financial counterparties (often referred to as wholesale deposits). Its products are supported by various services and capabilities, including risk management, account origination and funding services; loan processing and servicing; marketing and data and analytics; and its Enhanced Digital Suite.

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.

Bread Financial Holdings Inc has a Value Score of 96, which is considered to be undervalued.

When you look at Bread Financial Holdings Inc’s price-to-sales ratio at 0.43 compared to the industry median at 1.20, this company has a lower price relative to revenue compared to its peers. This could make Bread Financial Holdings Inc’s stock more attractive for value investors.

Bread Financial Holdings Inc’s price-earnings ratio is 4.96 compared to the industry median at 9.86. This means it has a lower share price relative to earnings compared to its peers. This could make Bread Financial Holdings Inc more attractive for value investors.

Now, let’s assess Bread Financial Holdings Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 10.5, 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. Bread Financial Holdings Inc’s shareholder yield is higher than its industry median ratio of 1.68%. 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. Bread Financial Holdings Inc’s price-to-book ratio is lower than its industry median ratio of 0.99. This could make Bread Financial Holdings Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Bread Financial Holdings Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Bread Financial Holdings Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 3.45. This could make Bread Financial Holdings Inc more attractive because the lower P/FCF ratio indicates that Bread Financial Holdings 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.

Mr Cooper Group Inc’s Value Grade

Value Grade:

Mr. Cooper Group Inc. provides servicing, origination and transaction-based services related to single family residences throughout the United States under the Mr. Cooper and Xome brands. The Company is also a home loan servicer and originator in the country focused on delivering a variety of servicing and lending products, services and technologies. The Company's Servicing segment performs operational activities on behalf of investors or owners of the underlying mortgages and mortgage servicing rights, including collecting and disbursing borrower payments, investor reporting, customer service, modifying loans. The Company's Originations segment originates residential mortgage loans through its direct-to-consumer channel, which provides refinance options for its existing customers, and through its correspondent channel, which purchases or originates loans from mortgage bankers. The Company’s subsidiaries are Home Point Capital Inc., and Roosevelt Management Company, LLC.

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.

Mr Cooper Group Inc has a Value Score of 71, which is considered to be undervalued.

Mr Cooper Group Inc’s price-earnings ratio is 8.7 compared to the industry median at 9.9. This means that it has a lower price relative to its earnings compared to its peers. This makes Mr Cooper Group Inc more attractive for value investors.

Mr Cooper Group Inc’s price-to-book ratio is lower than its peers. This could make Mr Cooper Group Inc more attractive for value investors when compared to the industry median at 0.99.

You can read more about Mr Cooper 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.

Enova International Inc’s Value Grade

Value Grade:

Enova International, Inc. is a technology and analytics company, which is focused on providing online financial services. The Company offers or arranges loans or draws on lines of credit to consumers in 37 states in the United States and Brazil. It also offers financing to small businesses in 49 states and Washington D.C. in the United States. Its customers include small businesses which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. The Company’s products and services include consumer installment loans; small business installment loans; consumer line of credit accounts; small business line of credit accounts; CSO program, and bank programs. It markets its financing products under the names CashNetUSA at www.cashnetusa.com, NetCredit at www.netcredit.com, OnDeck at www.ondeck.com, Headway Capital at www.headwaycapital.com and Pangea at www.pangeamoneytransfer.com.

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.

Enova International Inc has a Value Score of 87, which is considered to be undervalued.

Enova International Inc’s price-earnings ratio is 10.9 compared to the industry median at 9.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Enova International Inc less attractive for value investors.

Enova International Inc’s price-to-book ratio is lower than its peers. This could make Enova International Inc more attractive for value investors when compared to the industry median at 0.99.

You can read more about Enova International 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.

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 83, which is considered to be undervalued.

Orix Corp (ADR)’s price-earnings ratio is 11.7 compared to the industry median at 9.9. This means that it has a higher price relative to its earnings compared to its peers. This makes Orix Corp (ADR) less attractive for value investors.

Orix Corp (ADR)’s price-to-book ratio is lower than its peers. This could make Orix Corp (ADR) fairly attractive for value investors when compared to the industry median at 0.99.

You can read more about Orix Corp (ADR)’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 4 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.

• Bread Financial Holdings Inc stock has a Value Grade of A.
• Mr Cooper Group Inc stock has a Value Grade of B.
• Enova International Inc stock has a Value Grade of A.
• Orix Corp (ADR) stock has a Value Grade of A.

Now that you have a bit more background about each of the 4 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.

• 4 Undervalued Consumer Lending Stocks for Tuesday, June 04
• 3 Undervalued Consumer Lending Stocks for Monday, June 03
• 3 Undervalued Consumer Lending Stocks for Friday, May 31
• Why Aaron's Company Inc’s (AAN) Stock Is Up 9.99%

AAII Disclaimer

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