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Navient Gains From Inorganic Strategies, Legal Costs Rise
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Navient Corporation (NAVI - Free Report) continues to benefit from its strong position in the educational loan industry. Further, its expansion strategies and improving economic conditions are likely to bolster the top line. However, higher expenses remain a concern.
Navient has been focused on boosting its business through inorganic growth strategies. In May 2018, the lender entered into an agreement with First Data Corporation, under which the latter will become the primary provider of technology solutions for Navient’s loan portfolio. Navient believes that this deal to have a positive impact on its long-term cost structure. In November 2017, it acquired Earnest, which helped it cater to customers who were unable to get finance from traditional banks.
Also, an increasing awareness for educational benefits and declining unemployment rate are likely to aid Navient’s growth.
Further, the stock is undervalued as its price-to-book and price-to-earnings ratios remain below the respective industry averages. It currently has a Value Score of B.
However, the company remains exposed to increasing expenses. Several litigations issues and strict regulatory scrutiny in the U.S. student loan industry are likely to affect its financials.
Navient’s top line remains under pressure due to the declining FFELP (Federal Family Education Loan Program) loan portfolio. Interest earned on FFELP loans is primarily indexed to one-month LIBOR rates, whereas the cost of funds is mainly indexed to three-month LIBOR rates. In the rising interest rate environment, this difference in timing may create pressure on net interest margin for FFELP loans. On the other hand, rise in interest rates might also lower Navient’s floor income.
Shares of Navient have gained 1.1% so far this year against 3.6% decline witnessed by the industry it belongs to.
The Zacks Consensus Estimate for current-year earnings of $1.92 has remained stable over the past 30 days. The stock currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
The Zacks Consensus Estimate for Enova International’s (ENVA - Free Report) current-year earnings has been revised 2.4% upward in the past 60 days. Also, its share price has surged more than 160% over the past year. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CURO Group Holdings Corp. currently has a Zacks Rank of 2. Its earnings estimates for 2018 have been revised 3.4% upward over the past 60 days. Further, in the past year, the company’s shares have gained more than 110%.
The Zacks Consensus Estimate for Credit Acceptance Corporation (CACC - Free Report) current-year earnings has been revised 7.6% upward in the past 60 days. Also, its share price has risen more than 60% over the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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Navient Gains From Inorganic Strategies, Legal Costs Rise
Navient Corporation (NAVI - Free Report) continues to benefit from its strong position in the educational loan industry. Further, its expansion strategies and improving economic conditions are likely to bolster the top line. However, higher expenses remain a concern.
Navient has been focused on boosting its business through inorganic growth strategies. In May 2018, the lender entered into an agreement with First Data Corporation, under which the latter will become the primary provider of technology solutions for Navient’s loan portfolio. Navient believes that this deal to have a positive impact on its long-term cost structure. In November 2017, it acquired Earnest, which helped it cater to customers who were unable to get finance from traditional banks.
Also, an increasing awareness for educational benefits and declining unemployment rate are likely to aid Navient’s growth.
Further, the stock is undervalued as its price-to-book and price-to-earnings ratios remain below the respective industry averages. It currently has a Value Score of B.
However, the company remains exposed to increasing expenses. Several litigations issues and strict regulatory scrutiny in the U.S. student loan industry are likely to affect its financials.
Navient’s top line remains under pressure due to the declining FFELP (Federal Family Education Loan Program) loan portfolio. Interest earned on FFELP loans is primarily indexed to one-month LIBOR rates, whereas the cost of funds is mainly indexed to three-month LIBOR rates. In the rising interest rate environment, this difference in timing may create pressure on net interest margin for FFELP loans. On the other hand, rise in interest rates might also lower Navient’s floor income.
Shares of Navient have gained 1.1% so far this year against 3.6% decline witnessed by the industry it belongs to.
The Zacks Consensus Estimate for current-year earnings of $1.92 has remained stable over the past 30 days. The stock currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
The Zacks Consensus Estimate for Enova International’s (ENVA - Free Report) current-year earnings has been revised 2.4% upward in the past 60 days. Also, its share price has surged more than 160% over the past year. It flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CURO Group Holdings Corp. currently has a Zacks Rank of 2. Its earnings estimates for 2018 have been revised 3.4% upward over the past 60 days. Further, in the past year, the company’s shares have gained more than 110%.
The Zacks Consensus Estimate for Credit Acceptance Corporation (CACC - Free Report) current-year earnings has been revised 7.6% upward in the past 60 days. Also, its share price has risen more than 60% over the past year.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>