Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 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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3 Undervalued Consumer Lending Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Consumer Lending industry for Friday, June 14, 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.

Navient Corp’s Value Grade

Value Grade:

Navient Corporation provides technology-enabled education finance and business processing solutions. The Company operates through three segments: Federal Education Loans, Consumer Lending and Business Processing. In the Federal Education Loans segment, it owns Federal Family Education Loan Program (FFELP) loans and performs servicing on this portfolio. It also service FFELP Loans owned by other institutions. In the Consumer Lending segment, it owns originates and services in-school and refinance Private Education Loans. In the Business Processing segment, it provides business processing solutions, such as omnichannel contact center services, workflow processing, and revenue cycle optimization. It offers solutions to federal agencies, state governments, tolling and parking authorities, and other public sector clients. The Company's clients include hospitals, hospital systems, medical centers, large physician groups, other healthcare providers and public health departments.

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.

Navient Corp has a Value Score of 80, which is considered to be undervalued.

When you look at Navient Corp’s price-to-sales ratio at 1.49 compared to the industry median at 1.19, this company has a higher price relative to revenue compared to its peers. This could make Navient Corp’s stock less attractive for value investors.

Navient Corp’s price-earnings ratio is 9.22 compared to the industry median at 9.60. This means it has a lower share price relative to earnings compared to its peers. This could make Navient Corp more attractive for value investors.

Now, let’s assess Navient Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 227.5, when compared to the industry median of 14.4, the company may be considered overvalued 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. Navient Corp’s shareholder yield is higher than its industry median ratio of 1.71%. 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. Navient Corp’s price-to-book ratio is lower than its industry median ratio of 0.99. This could make Navient Corp more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Navient Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Navient Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 3.44. This could make Navient Corp more attractive because the lower P/FCF ratio indicates that Navient Corp 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.

OneMain Holdings Inc’s Value Grade

Value Grade:

OneMain Holdings, Inc. is a financial service holding company. The Company provides personal loan products; offers credit cards; offers optional credit insurance and other; offers a customer-focused financial wellness program, and acquisitions and dispositions of assets and businesses. It provides origination, underwriting, and servicing of personal loans, primarily to nonprime customers. In addition, the Company offers two credit cards, BrightWay and BrightWay+, through a third-party bank partner. The Company offers optional credit insurance products, such as credit life insurance, which provides for payment to the lender of the finance receivable in the event of the borrower’s death; credit disability insurance, which provides scheduled monthly loan payments to the lender during borrower’s disability due to illness or injury, and credit involuntary unemployment insurance, which provides scheduled monthly loan payments to the lender during borrower’s involuntary unemployment.

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.

OneMain Holdings Inc has a Value Score of 76, which is considered to be undervalued.

OneMain Holdings Inc’s price-earnings ratio is 9.4 compared to the industry median at 9.6. This means that it has a lower price relative to its earnings compared to its peers. This makes OneMain Holdings Inc more attractive for value investors.

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

You can read more about OneMain 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 focused on delivering digitally enabled product suites. The Company provides a range of credit products through financing programs it has established with a diverse group of national and regional retailers, local merchants, manufacturers, buying groups, industry associations and healthcare service providers. The Company primarily offers private label, dual card, co-brand, and general-purpose credit cards, as well as short- and long-term installment loans, and savings products through Synchrony Bank (the Bank). It primarily manages its credit products through five sales platforms (Home & Auto, Digital, Diversified & Value, Health & Wellness and Lifestyle). The Bank offers directly to retail, affinity relationships and commercial customers, a range of deposit products, including certificates of deposit, individual retirement accounts (IRAs), money market accounts, savings accounts and sweep and affinity deposits.

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 6.1 compared to the industry median at 9.6. 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 0.99.

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 3 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.

• Navient Corp stock has a Value Grade of B.
• OneMain 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 3 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.

• 3 Undervalued Consumer Lending Stocks for Friday, June 14
• 3 Undervalued Consumer Lending Stocks for Thursday, June 13
• Why Aaron's Company Inc’s (AAN) Stock Is Down 5.15%
• Why Green Dot Corporation’s (GDOT) Stock Is Down 4.62%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.