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Organic Growth Efforts Support Navient (NAVI): Time to Buy?

Zacks Equity Research

Navient Corporation NAVI continues to benefit from a strong position in the educational loan industry. Further, it plans to bolster the top line through loan originations and the strengthening of the business processing segment. However, higher legal expenses remain concerning.

The Zacks Consensus Estimate for current-year earnings of $3.09 has been unchanged over the past 30 days. The company currently carries a Zacks Rank #2 (Buy).

Shares of Navient have lost 44.6% over the past six months compared with a 48.4% decline witnessed by the industry it belongs to.

 


Following its separation from SLM Corporation SLM, the company has remained focused on introducing products and building technology platforms such as the launch of an innovative and user-friendly Private Education Loan product to help students and families finance higher education. The initiatives are expected to help the lender meet new loan origination targets and drive top-line growth.

Also, the company continues to boost its business through inorganic growth strategies. In November 2017, it acquired Earnest, which helped it cater to customers who were unable to get finance from traditional banks. In August 2017, the lender extended its reach beyond educational loans by acquiring Duncan Solutions — a provider of technology-enabled parking and toll services.

Further, the stock looks undervalued as its price-to-book and price-to-earnings ratios remain below the respective industry averages. It currently has a Value Score of A.

However, the company is exposed to increasing expenses. Several litigations issues and strict regulatory scrutiny in the U.S. student loan industry are likely to affect its financials.

Also, Navient is less active in relation to its capital deployment activities. Though the company approved a share buyback program of up to $1 billion in October 2019, it last announced a dividend hike in January 2015. Since Navient’s debt/equity ratio compares unfavorably with its industry average, we believe that the capital deployment activities might not be sustainable.

Other Stocks to Consider

The Zacks Consensus Estimate for Enova International, Inc. ENVA current-year earnings has been stable in the past seven days. Also, its share price has increased 1% in the past three years. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Credit Acceptance Corporation CACC current-year earnings has been unchanged in the past seven days. Also, its share price has increased 29.8% in the past three years. It carries a Zacks Rank #2 at present.

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