The promise of disruptive fintech innovations buoys the consumer financial sector’s prospects. In this era of financial evolution, placing a paramount emphasis on customer experience is essential. Fintech and digital banking entities are giving priority to user-centric design and personalized services to elevate customer satisfaction.
In this context, scooping up the shares of three fundamentally solid consumer finance stocks, Mastercard Incorporated (MA), Noah Holdings Limited (NOAH), and EZCORP, Inc. (EZPW), might lead to a boost in your portfolio’s health this month.
Consumer finance services comprise a diverse array of offerings, spanning banking products like savings and checking accounts, loans, credit cards, insurance, investment products, and a variety of payment services. In the post-pandemic era, the widespread adoption of internet and mobile technologies has led to a notable rise in the desire for these services to be accessible online.
Moreover, consumers now expect seamless and convenient financial services. This change in expectations is compelling financial institutions to allocate resources toward developing user-friendly interfaces, providing personalized services, and expediting transaction processing.
Financial institutions leverage technology to offer innovative solutions such as robo-advisors and mobile payment platforms. The financial service application market is expected to hit $240.21 billion by 2028, growing at an impressive CAGR of 13.1%.
Furthermore, this increasing trend towards digital payments and online transactions offers substantial growth prospects for consumer finance companies. The global consumer finance market is expected to hit $1.96 trillion by 2029, exhibiting a CAGR of 7.1% spanning from 2023 to 2029.
On top of it, the financial services industry is progressively utilizing generative AI to build predictive models for credit risk assessment and fraud detection. In addition, financial institutions are incorporating Machine Learning (ML) and Natural Language Processing (NLP) to create more advanced bots.
These AI-powered tools elevate customer service by diminishing response times and personalizing interactions with customers. The generative AI in the financial market is projected to surpass $9.48 billion by 2032, growing at a robust CAGR of 28.1%.
Looking ahead to 2024, the financial industry is poised for technological transformations, encompassing developments such as generative AI, transition to the cloud, and the convergence of industry boundaries through trends like embedded finance.
In light of such encouraging trends, let us dive deeper into the fundamentals of the featured stocks in detail:
Mastercard Incorporated (MA)
MA is a technology company that provides transaction processing and other payment-related products and services in the United States and internationally. The company offers integrated products and value-added services for account holders, merchants, financial institutions, businesses, governments, etc.
On December 5, MA declared a quarterly dividend of $0.66 per share, reflecting a 16% increase from the previous dividend of $0.57 per share. The dividend will be paid to its shareholders on February 9, 2024.
The company’s annual dividend of $2.64 translates to a 0.56% yield on the prevailing prices, while its four-year average dividend yield is 0.52%. Its dividend payouts have grown at a CAGR of 12.5% and 17.9% over the past three and five years, respectively. Also, MA has a record of 12 years of consecutive dividend growth.
On November 30, Dynamic Yield by MA introduced Shopping Muse, an innovative generative AI tool transforming how consumers navigate digital catalogs. This tool replicates the in-store experience by interpreting casual language into personalized product suggestions, including coordinating items.
Raj Seshadri, President of Data & Services at MA emphasized the company's commitment to leveraging technology and machine learning for improved outcomes for both brands and consumers. The focus is on utilizing these advanced tools to enhance the overall experience and benefits in the realm of data and services provided by MA.
MA’s trailing-12-month levered FCF margin of 41.42% is 139.6% higher than the 17.29% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.63x is 200.3% higher than the 0.21x industry average. Furthermore, the stock’s trailing-12-month EBITDA margin of 60.66% is 182.4% higher than the 21.48% industry average.
For the fiscal third quarter, which ended on September 30, 2023, MA’s net revenue increased 13.5% year-over-year to $6.53 billion. The company’s net income rose 27.9% from the year-ago value to $3.19 billion, while its EPS improved 31.4% year-over-year to $3.39. In addition, its operating income came in at $3.84 billion, up 23.5% from the prior-year quarter.
The consensus revenue estimate of $6.47 billion for the fourth quarter (ending December 2023) reflects an 11.3% increase year-over-year. While, the consensus EPS estimate of $3.08 for the same quarter represents a 16.1% year-over-year improvement.
Moreover, the company has an excellent surprise history, surpassing its revenue and EPS estimates in each of the trailing four quarters.
MA’s shares have gained 17.5% year-to-date to close the last trading session at $408.69.
MA’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Momentum, Stability, and Sentiment. In the 47-stock Consumer Financial Services industry, it is ranked #4. Click here to see MA’s ratings for Growth and Value.
Noah Holdings Limited (NOAH)
Headquarter in Shanghai, the People's Republic of China, NOAH operates as a wealth and asset management service provider with the focus on investment and asset allocation services for high-net-worth individuals and enterprises. It operates through three segments: Wealth Management; Asset Management; and Other Businesses.
NOAH’s trailing-12-month levered FCF margin of 33.67% is 94.8% higher than the 17.29% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.28x is 33.6% higher than the 0.21x industry average. Furthermore, the stock’s trailing-12-month EBITDA margin of 37.31% is 73.7% higher than the 21.48% industry average.
In the fiscal third quarter, which ended on September 30, 2023, NOAH’s net revenues increased 9.6% year-over-year to $102.79 million, while its income from operations rose 7.4% from the prior-year quarter to $34.11 million.
The company’s net income amounted to $31.80 million, representing an increase of 30.4% from the year-ago value. Furthermore, NOAH’s net income per ADS stood at $0.46, up 27.8% year-over-year.
For the fiscal year ending December 2023, NOAH’s revenue is expected to increase 6.2% year-over-year to $478.40 million, while its EPS for the same period is expected to be $2.11. Moreover, its EPS is projected to improve by 81.5% per annum over the next five years.
Over the past month, NOAH’s shares have surged 7.2% to close the last trading session at $12.84.
NOAH’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Quality. Within the nine stocks in the Foreign Consumer Finance industry, it is ranked #2. Click here to see the other ratings of NOAH for Growth, Stability, and Sentiment.
EZCORP, Inc. (EZPW)
EZPW offers pawn loans collateralized by tangible personal property, jewelry, consumer electronics, tools, sporting goods, and musical instruments. The company operates through three segments: U.S. Pawn; Latin America Pawn; and Other Investments.
The stock’s trailing-12-month Return On Total Assets (ROTA) of 2.62% is 126.6% higher than the 1.16% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.75x is 254.9% higher than the 0.21x industry average. Furthermore, EZPW’s trailing-12-month CAPEX/Sales of 3.86% is 94.9% higher than the 1.98% industry average.
EZPW’s total revenue for the fiscal fourth quarter (ended September 30, 2023) increased 15.9% year-over-year to $270.48 million, while its gross profit improved 15.8% from the year-ago value to $159.37 million.
The company’s net income and EPS came in at $10.25 million and $0.15, up 39.7% and 36.4% from the prior-year quarter, respectively. Moreover, its operating income grew 11.2% from the year-ago value to $16.56 million.
Street expects EZPW’s revenue and EPS for the fiscal first quarter (ending December 2023) to increase 12.1% and 3.6% year-over-year to $296.28 million and $0.29, respectively. Additionally, the company topped its revenue and EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 6.6% year-to-date and 5.9% over the past three months to close the last trading session at $8.69.
It’s no surprise that EZPW has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Growth, Value, and Momentum. Out of 47 stocks in the Consumer Financial Services industry, it is ranked #3.
In addition to the POWR Ratings we’ve stated above, we also have EZPW’s ratings for Stability, Sentiment, and Quality. Get all EZPW ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MA shares were trading at $410.38 per share on Wednesday afternoon, up $1.69 (+0.41%). Year-to-date, MA has gained 18.74%, versus a 20.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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