Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. But worries about economic uncertainty and potential market volatility have kept sentiment in check, and over the past six months, the industry's return was flat while the S&P 500 climbed by 5%.
Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. Taking that into account, here are two resilient financials stocks at the top of our wish list and one that may face trouble.
One Financials Stock to Sell:
Hercules Capital (HTGC)
Market Cap: $2.79 billion
Named after the mythological hero known for his strength, Hercules Capital (NYSE: HTGC) is a business development company that provides debt financing to venture capital-backed and growth-stage technology and life sciences companies.
Why Do We Pass on HTGC?
- Incremental sales over the last two years were much less profitable as its earnings per share fell by 4.2% annually while its revenue grew
- 6× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Hercules Capital’s stock price of $15.44 implies a valuation ratio of 8.2x forward P/E. To fully understand why you should be careful with HTGC, check out our full research report (it’s free).
Two Financials Stocks to Watch:
Visa (V)
Market Cap: $588.6 billion
Processing over 829 million transactions daily and connecting billions of cards to 150 million merchant locations worldwide, Visa (NYSE: V) operates one of the world's largest electronic payments networks, facilitating secure money movement across more than 200 countries through its VisaNet processing platform.
Why Should You Buy V?
- Offerings and unique value proposition resonate with customers, as seen in its above-market 14% annual sales growth over the last five years
- Share repurchases over the last five years enabled its annual earnings per share growth of 19% to outpace its revenue gains
- ROE punches in at 45.7%, illustrating management’s expertise in identifying profitable investments
Visa is trading at $308.74 per share, or 23.5x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
BGC (BGC)
Market Cap: $5.38 billion
Tracing its roots back to 1945 and named after founder Bernard Gerald Cantor, BGC Group (NASDAQ: BGC) operates a global brokerage and financial technology platform that facilitates trading across fixed income, foreign exchange, equities, energy, and commodities markets.
Why Do We Like BGC?
- Annual revenue growth of 20.2% over the past two years was outstanding, reflecting market share gains this cycle
- Earnings growth has easily exceeded the peer group average over the last two years as its EPS has compounded at 20.2% annually
- Management team has demonstrated it can invest in profitable ventures through its 11.7% five-year return on equity
At $11.50 per share, BGC trades at 8x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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