Given the dominance in every phase of the student loan life cycle and focus on enhancement of Private Education Loan assets and revenues, Sallie Mae SLM appears to be a solid bet, at the moment. The company’s focus on growing consumer banking business and the declining unemployment rate are anticipated to drive the stock.
The Finance sector was one of the best performers in the fourth-quarter reporting cycle. So, we thought of bringing up a stock from the sector that reflects robust fundamentals and solid long-term growth opportunities.
Sallie Mae has been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 60 days, the Zacks Consensus Estimate for 2019 and 2020 increased 2.5% and 3.6%, respectively.
Further, this Zacks Rank #2 (Buy) stock has gained 12.3% over the past three months compared with 3.6% growth recorded by the Zacks categorized Consumer Loans industry.
Notably, Sallie Mae has a number of other aspects that make it an attractive investment option.
6 Reasons Why Sallie Mae is a Must Buy
Focused Approach: Sallie Mae intends to improve its Private Education Loan assets and revenues while maintaining a strong capital position and introducing multiple complementary products. Moreover, it expects an improvement in the efficiency ratio as a result of expense-management initiatives.
Growth Prospects: Sallie Mae’s student loan portfolio is likely to benefit from the improving trends of enrollment and increasing tuition costs, leading to higher demand for education loans over the next few years.
Revenue Growth: Organic growth remains a key strength at Sallie Mae, as depicted in its revenue growth story. The company’s projected sales growth (F1/F0) of 15.8% (as against the 5.6% industry average) indicates constant upward momentum in revenues.
Earnings Per Share Strength: Sallie Mae’s long-term (three-five years) estimated EPS growth rate of 19.5% promises rewards for investors, over the long run. Furthermore, the company’s projected earnings growth (F1/F0) of 16.7% (as against the 11.8% industry average) indicates constant upward momentum in earnings. In addition, the company recorded average positive earnings surprise of 9% in the last four quarters.
Superior Return on Equity (ROE): Sallie Mae’s ROE of 20.1%, compared with the industry average of 14.8%, highlights the company’s commendable position over its peers.
Stock Looks Undervalued:The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks to Consider
Enterprise Financial Services Corporation EFSC has been witnessing upward estimate revisions for the last 60 days. Additionally, the stock has jumped more than 3% in the past three months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
M&T Bank MTB has been witnessing upward estimate revisions for the last 60 days. Also, the company’s shares have risen nearly 8.8% over the past three months. It presently holds a Zacks Rank #2.
Great Southern Bancorp, Inc. GSBC, another Zacks #1 Ranked stock, has been witnessing upward estimate revisions for the last 60 days. In three months’ time, the company’s share price has been up more than 5%.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
See Latest Stocks Today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
M&T Bank Corporation (MTB) : Free Stock Analysis Report
Enterprise Financial Services Corporation (EFSC) : Free Stock Analysis Report
SLM Corporation (SLM) : Free Stock Analysis Report
Great Southern Bancorp, Inc. (GSBC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research