2 Financials Stocks for Long-Term Investors and 1 We Find Risky
Financial firms serve as the backbone of the economy, providing essential services from lending and investment management to risk management and payment processing. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have certainly contributed to the indutry’s recent underperformance – over the past six months, its 2.2% gain has fallen behind the S&P 500’s 9.9% rise.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here are two resilient financials stocks at the top of our wish list and one we’re steering clear of.
Market Cap: $1.27 billion
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ:CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Why Is CSWC Not Exciting?
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Incremental sales over the last two years were much less profitable as its earnings per share fell by 5.5% annually while its revenue grew
At $22.04 per share, Capital Southwest trades at 9.7x forward P/E. Dive into our free research report to see why there are better opportunities than CSWC.
Market Cap: $5.08 billion
Operating as both an advisor and asset manager with over $100 billion in assets under management, StepStone Group (NASDAQ:STEP) is an investment firm that provides clients with access to private market investments across private equity, real estate, private debt, and infrastructure.
Why Will STEP Beat the Market?
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Annual revenue growth of 32.5% over the last two years was superb and indicates its market share increased during this cycle
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Additional sales over the last two years increased its profitability as the 41.4% annual growth in its earnings per share outpaced its revenue
StepStone Group’s stock price of $64.17 implies a valuation ratio of 28.7x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.
Market Cap: $5.49 billion
Originally created as a government-sponsored enterprise before privatizing in 2004, Sallie Mae (NASDAQ:SLM) is a financial services company that provides private education loans, savings products, and educational resources to help students and families pay for college.
Why Are We Bullish on SLM?
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Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
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ROE punches in at 34.5%, illustrating management’s expertise in identifying profitable investments
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