Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. Market leaders have certainly capitalized on a favorable backdrop to boost profitability, helping fuel a 9.1% gain for the industry over the past six months - 4.8 percentage points higher than 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. Taking that into account, here is one resilient financials stock at the top of our wish list and two that may face trouble.
Two financials stocks to sell:
Cohen & Steers (CNS)
Market cap: $3.89 billion
Founded in 1986 as a pioneer in real estate investment trusts (REITs), Cohen & Steers (NYSE: CNS) is an investment manager specializing in real estate securities, infrastructure, real assets, and preferred securities for institutional and individual investors.
Why Do We Avoid CNS?
- Annual revenue growth of 2.1% over the last five years was below our standards for the financials sector
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.2% annually while its revenue grew
Cohen & Steers’s stock price of $75.72 implies a valuation ratio of 22.2x forward P/E. Dive into our free research report to see why there are better opportunities than CNS.
Ally Financial (ALLY)
Market cap: $11.81 billion
Born from the former GMAC (General Motors Acceptance Corporation) and rebranded in 2010, Ally Financial (NYSE: ALLY) operates a digital-first bank offering auto financing, insurance, mortgage lending, and investment services to consumers and commercial clients.
Why Should You Sell ALLY?
- Annual revenue growth of 2.1% over the last five years was below our standards for the financials sector
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 10.3% annually
At $38.83 per share, Ally Financial trades at 6.5x forward P/E. Read our free research report to see why you should think twice about including ALLY in your portfolio.
One financials stock to watch:
SEI Investments (SEIC)
Market cap: $12.88 billion
Founded in 1968 as Simulated Environments Inc. to train bank loan officers using computer simulations, SEI Investments (NASDAQ: SEIC) provides technology platforms, investment management, and operational solutions for financial institutions, wealth managers, and investors.
Why Does SEIC Stand Out?
- Annual revenue growth of 11.1% over the last two years beat the sector average and underscores the unique value of its offerings
- Share repurchases over the last two years enabled its annual earnings per share growth of 20.8% to outpace its revenue gains
SEI Investments is trading at $108.68 per share, or 15.3x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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