Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. These companies have benefited from improving market activity and economic fundamentals, so it’s no surprise the industry has posted a 5.8% gain over the past six months, nearly mirroring the S&P 500.
Although these firms have produced good results, only a handful will thrive over the long term as fintech disruptors are rapidly taking market share from the incumbents. With that said, here are two resilient financials stocks at the top of our wish list and one best left ignored.
One financials stock to sell:
Payoneer (PAYO)
Market cap: $2.44 billion
Founded during the early days of global e-commerce in 2005 to solve international payment challenges, Payoneer (NASDAQ: PAYO) provides financial technology services that enable small and medium-sized businesses to send and receive payments globally across borders.
Why Does PAYO Fall Short?
- Earnings per share fell by 21.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Underwhelming 8.3% return on equity reflects management’s difficulties in finding profitable growth opportunities
Payoneer is trading at $7.16 per share, or 18.9x forward P/E. To fully understand why you should be careful with PAYO, check out our full research report (it’s free).
Two financials stocks to watch:
State Street (STT)
Market cap: $44.96 billion
Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE: STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.
Why Do We Like STT?
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Management team has demonstrated it can invest in profitable ventures through its 10.7% five-year return on equity
State Street’s stock price of $165.72 implies a valuation ratio of 11.5x forward P/E. Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
Shift4 (FOUR)
Market cap: $3.38 billion
Starting as a payment gateway provider in 1999 and now processing over $200 billion in annual payment volume, Shift4 Payments (NYSE: FOUR) provides integrated payment processing solutions and software that help businesses accept and manage transactions across in-store, online, and mobile channels.
Why Do We Love FOUR?
- Impressive 25% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Share repurchases over the last two years enabled its annual earnings per share growth of 27.7% to outpace its revenue gains
- ROE punches in at 17.2%, illustrating management’s expertise in identifying profitable investments
At $41.78 per share, Shift4 trades at 7.7x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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