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, September 01, 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.

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 94, which is considered to be undervalued.

When you look at Bread Financial Holdings Inc’s price-to-sales ratio at 0.40 compared to the industry median at 0.94, 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 3.63 compared to the industry median at 9.47. 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 11.7, when compared to the industry median of 15.5, 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 lower than its industry median ratio of 2.29%. 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 0.87. 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 3.09. 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.

Curo Group Holdings Corp’s Value Grade

Value Grade:

CURO Group Holdings Corp. is a technology-enabled, omni-channel consumer finance company. The Company provide customers a variety of financial services. It is engaged in serving a full spectrum of credit products. It operates a range of brand, including Cash Money, LendDirect, Flexiti, Heights Finance, Southern Finance, Covington Credit, Quick Credit and First Heritage Credit. The Company's segments include the Direct Lending and Canada POS Lending. Its Direct Lending segment provides the revolving line of credit (LOC), secured and unsecured installment and single-pay loan products, together with the credit protection and other insurance products, and other ancillary sales in the United States and Canada. Its Canada POS Lending segment serves Canadian customers through POS financing available at approximately 8,500 retail locations and over 3,600 merchant partners across 10 provinces and two territories.

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.

Curo Group Holdings Corp has a Value Score of 95, which is considered to be undervalued.

You can read more about Curo Group Holdings 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.

EZCORP Inc’s Value Grade

Value Grade:

EZCORP, Inc. is a provider of pawn transactions in the United States and Latin America. The Company also sells merchandise, primarily collateral forfeited from pawn lending operations and pre-owned and recycled merchandise purchased from customers. It operates through three segments: U.S. Pawn, Latin America Pawn, and Other Investments. The U.S. Pawn segment includes its EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States. The Latin America Pawn segment includes its Empeno Facil, Cash Apoyo Efectivo (CAE) and other branded pawn operations in Mexico, as well as its GuatePrenda and MaxiEfectivo pawn operations in Guatemala, El Salvador and Honduras (GPMX). At its pawn stores, it advances cash against the value of collateralized tangible personal property and sells merchandise to customers looking for good value. The merchandise it sells primarily consists of second-hand collateral forfeited from its pawn activities or merchandise purchased from customers.

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.

EZCORP Inc has a Value Score of 82, which is considered to be undervalued.

EZCORP Inc’s price-earnings ratio is 22.3 compared to the industry median at 9.5. This means that it has a higher price relative to its earnings compared to its peers. This makes EZCORP Inc less attractive for value investors.

EZCORP Inc’s price-to-book ratio is higher than its peers. This could make EZCORP Inc less attractive for value investors when compared to the industry median at 0.87.

You can read more about EZCORP 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.

Qifu Technology Inc - ADR’s Value Grade

Value Grade:

Qifu Technology Inc, formerly 360 DigiTech Inc, is a China-based company mainly engaged in credit technology services. The services provided by the Company are divided into credit-driven services and platform services according to the nature of the service and the level of related credit risk. The credit-driven services match potential borrowers with financial institutions, enabling financial institutions to obtain borrowers, conduct credit evaluation, fund matching and post-loan services. The platform services include a full range of loan assistance and post-loan services under the capital-light model, intelligent marketing services, referral services, and risk management software as services (SaaS) for financial institution partners under the Intelligent Credit Engine (ICE) model.

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.

Qifu Technology Inc - ADR has a Value Score of 93, which is considered to be undervalued.

Qifu Technology Inc - ADR’s price-earnings ratio is 5.2 compared to the industry median at 9.5. This means that it has a lower price relative to its earnings compared to its peers. This makes Qifu Technology Inc - ADR more attractive for value investors.

Qifu Technology Inc - ADR’s price-to-book ratio is lower than its peers. This could make Qifu Technology Inc - ADR more attractive for value investors when compared to the industry median at 0.87.

You can read more about Qifu Technology Inc - 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.

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 74, 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 0.87.

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.

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.

• Bread Financial Holdings Inc stock has a Value Grade of A.
• Curo Group Holdings Corp stock has a Value Grade of A.
• EZCORP Inc stock has a Value Grade of A.
• Qifu Technology Inc - ADR stock has a Value Grade of A.
• Sentage Holdings Inc stock has a Value Grade of B.

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, September 01
• 3 Undervalued Consumer Lending Stocks for Thursday, August 31
• 7 Undervalued Consumer Lending Stocks for Wednesday, August 30
• Why Upstart Holdings Inc’s (UPST) Stock Is Up 4.16%

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