Navient Corporation ( NAVI Quick Quote NAVI - Free Report) continues to benefit from its strong position in the educational loan industry as well as cost-control efforts. Further, the company’s plans to bolster the top line through new loan originations and strengthening the business processing segment bodes well.
The company’s earnings estimates have been revised 32.1% upward for the current year, over the past 60 days. As a result, the stock carries a Zacks Rank #2 (Buy), at present.
Shares of the company have gained 97% in the past six months compared with 60.5% growth recorded by the
industry. Image Source: Zacks Investment Research
Navient is the biggest portfolio holder of Private Education Loans and education loans insured or guaranteed under the FFELP. Also, its efforts to fortify the asset recovery and business process outsourcing capabilities are likely to aid the top line. Further, the company continues to deploy its technology platform and digital marketing tools to attract originations that bode well for financials.
Moreover, Navient’s involvement in inorganic growth strategies to improve its business seems impressive. In 2017, the company acquired Earnest and Duncan Solutions, which helped the lender extend its reach beyond educational loans. Thus, its efforts to tap growth opportunities are likely to enhance the business.
Its cost-control efforts are encouraging, as it witnessed stable expenses in the last three years (ended 2019) despite incurring restructuring expenses. Navient seeks to improve operating efficiency by undertaking cost-control initiatives. Notably, costs declined in 2020 on lower operating expenses. We expect such efforts to support the company’s bottom-line growth.
Furthermore, the stock seems undervalued as its price-to-book (P/B) and price-to-earnings (P/E) (F1) ratios are below the respective industry averages. Additionally, it has a
Value Score of B.
However, the company faces re-pricing risks related to its assets. This is because interest earned on FFELP loans and private education loans is primarily indexed to 1-month LIBOR rates and either 1-month LIBOR rates or 1-month Prime rates, respectively, whereas cost of funds is primarily indexed to 3-month LIBOR rates.
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