LM Funding America Inc (NASDAQ:LMFA), a $10.64M small-cap, operates in the financial services industry, which tends to draw the more conservative investors who attracted by their steady revenue and the above-average dividend yields. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 4.90% in the upcoming year . Below, I will examine the sector growth prospects, as well as evaluate whether LM Funding America is lagging or leading in the industry. View our latest analysis for LM Funding America
What’s the catalyst for LM Funding America’s sector growth?
Recently, government and overseas regulators involvement has increased to play a prominent role, closely examining and controlling day-to-day business administration of certain companies. In the past year, the industry delivered growth in the twenties, beating the US market growth of 10.46%. LM Funding America lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means LM Funding America may be trading cheaper than its peers.
Is LM Funding America and the sector relatively cheap?
The financial services sector’s PE is currently hovering around 15x, lower than the rest of the US stock market PE of 20.1x. This means the industry, on average, is relatively undervalued compared to the wider market – a potential mispricing opportunity here! Though, the industry returned a similar 10.78% on equities compared to the market’s 10.42%. Since LM Funding America’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge LM Funding America’s value is to assume the stock should be relatively in-line with its industry.
LM Funding America has been a financial services industry laggard in the past year. If LM Funding America has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its financial peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at LM Funding America’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has LMFA’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of LM Funding America? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.