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4 Reasons Why You Should Buy Sallie Mae (SLM) Stock Now
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Sallie Mae (SLM - Free Report) , one of the largest and best known private student loan companies, remains focused on growing its consumer banking business, following the spinoff in Apr 2014. Formally known as SLM Corporation, the company with its presence in the market for over 40 years, has serviced more than 30 million Americans.
As of Jun 30, 2016, this Newark, DE-based company had total assets of $15.6 billion, $12.2 billion in Private Education Loans, $1.1 billion of FFELP loans (Federal Family Education Loan Program) and total deposits of $11.9 billion.
Since the beginning of the year, shares of Sallie Mae have gained more than 15%, compared with a 2% decline in the KBW Nasdaq Bank Index.
Several issues including a competitive business environment and stricter regulations pose near-term concerns for the company. Nevertheless, keeping those in the sidelines, the stock currently carrying a Zacks Rank #2 (Buy), seems an attractive investment opportunity with plenty of upside potential.
Why an Attractive Pick?
Focused on Growth Initiatives: Among several of its objectives set for 2016, Sallie Mae aims to enhance Private Education Loan assets and revenues, maintain a strong capital position, launch new products and manage expenses while improving efficiency. Notably, originations increased 6% year over year in 2015, with the improving trend continuing in first half of 2016 as well. Also, management expects the efficiency ratio to decline steadily over the next few years from the 2015 level of 46.8%.
Upbeat EPS Outlook: In the latest earnings conference call, management stated that it expects core earnings per share in the range of 51–52 cents for the year, up from the prior outlook of $0.49–$0.51. Further, net interest margin is projected to be more than 5.60% for the year.
Improving Credit Quality: Amid a declining unemployment scenario, improving housing sector and low default rates, the performance of consumer finance business signals a healthy position. While Sallie Mae’s delinquencies increased during the first half of 2016, loans in forbearance decreased. The company expects allowance for loan losses to rise to 1.30% by year end as the loan portfolio grows and seasons, however, on a positive note, charge-off rate as a percentage of loans in full principal and interest repayments are anticipated to fall in upcoming quarters.
Leverage: Sallie Mae’s debt/equity ratio stands at 0.64 compared with the industry average of 0.89, indicating lower debt level relative to the industry.
Stocks to Consider
Some top-ranked stocks in the finance space include Meta Financial Group, Inc. (CASH - Free Report) , Enterprise Financial Services Corp. (EFSC - Free Report) and Regional Management Corp. (RM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>
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4 Reasons Why You Should Buy Sallie Mae (SLM) Stock Now
Sallie Mae (SLM - Free Report) , one of the largest and best known private student loan companies, remains focused on growing its consumer banking business, following the spinoff in Apr 2014. Formally known as SLM Corporation, the company with its presence in the market for over 40 years, has serviced more than 30 million Americans.
As of Jun 30, 2016, this Newark, DE-based company had total assets of $15.6 billion, $12.2 billion in Private Education Loans, $1.1 billion of FFELP loans (Federal Family Education Loan Program) and total deposits of $11.9 billion.
Since the beginning of the year, shares of Sallie Mae have gained more than 15%, compared with a 2% decline in the KBW Nasdaq Bank Index.
SLM CORP Price
SLM CORP Price | SLM CORP Quote
Several issues including a competitive business environment and stricter regulations pose near-term concerns for the company. Nevertheless, keeping those in the sidelines, the stock currently carrying a Zacks Rank #2 (Buy), seems an attractive investment opportunity with plenty of upside potential.
Why an Attractive Pick?
Focused on Growth Initiatives: Among several of its objectives set for 2016, Sallie Mae aims to enhance Private Education Loan assets and revenues, maintain a strong capital position, launch new products and manage expenses while improving efficiency. Notably, originations increased 6% year over year in 2015, with the improving trend continuing in first half of 2016 as well. Also, management expects the efficiency ratio to decline steadily over the next few years from the 2015 level of 46.8%.
Upbeat EPS Outlook: In the latest earnings conference call, management stated that it expects core earnings per share in the range of 51–52 cents for the year, up from the prior outlook of $0.49–$0.51. Further, net interest margin is projected to be more than 5.60% for the year.
Improving Credit Quality: Amid a declining unemployment scenario, improving housing sector and low default rates, the performance of consumer finance business signals a healthy position. While Sallie Mae’s delinquencies increased during the first half of 2016, loans in forbearance decreased. The company expects allowance for loan losses to rise to 1.30% by year end as the loan portfolio grows and seasons, however, on a positive note, charge-off rate as a percentage of loans in full principal and interest repayments are anticipated to fall in upcoming quarters.
Leverage: Sallie Mae’s debt/equity ratio stands at 0.64 compared with the industry average of 0.89, indicating lower debt level relative to the industry.
Stocks to Consider
Some top-ranked stocks in the finance space include Meta Financial Group, Inc. (CASH - Free Report) , Enterprise Financial Services Corp. (EFSC - Free Report) and Regional Management Corp. (RM - Free Report) , each sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>