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Here Are 6 Reasons Why Sallie Mae (SLM) Stock Is Worth Buying
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Sallie Mae (SLM - Free Report) appears to be a solid bet given its dominant position as an education loan provider. It is expected to benefit from growth in enrollments in the near term. The company is also inclined to reduce expenses while gaining efficiencies from operations.
Analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for 2022 and 2023 earnings has been revised 4.6% and 4% upward, respectively, over the past 30 days. Sallie Mae currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, shares of the company have rallied 23.6% over the past year compared with an 18% rise recorded by the industry.
Image Source: Zacks Investment Research
6 Reasons Why Sallie Mae is a Must Buy Now
Earnings Growth: Sallie Mae witnessed earnings growth of 46.7% in the past three to five years, higher than the industry average of 20.2%. While the company’s earnings are projected to decline 19.9% for 2022, they are expected to witness growth of 7.4% in 2023.
Sallie Mae’s earnings beat the Zacks Consensus Estimate in each of the four trailing quarters, with the average being 34.38%.
Revenue Growth: Sallie Mae’s rising average loan balance and yields on cash and other short-term investments have supported net interest income (NII) growth. Though the NII declined in both 2020 and 2021, the same witnessed a CAGR of 5.4% over the last five years (ended 2021). The company’s aim to grow the private education loan portfolio is expected to support its NII in the future.
Private education loan originations witnessed a CAGR of 3.1% in the six-year period (2016-2021). Management projects an 8%-10% increase in private education loan originations this year.
Sallie Mae’s 2022 revenues are projected to grow 5.9%, whereas 2023 revenues will likely grow 2.9%.
Dominant Player: Sallie Mae is the dominant player in providing student loans, which gives it a competitive advantage of scale. Strengthening of the U.S. economy and anticipated spring semester demand will drive higher demand for education loans. The company expects to sell loans worth $3 billion in 2022, $1 billion in the first quarter and $2 billion in the third quarter of the year.
Opportunistic Acquisitions: Sallie Mae is expanding its business operations through investments in different product offerings and acquisitions. In January 2022, it inked a deal with Epic Research LLC to acquire Nitro College. The deal will bolster the company’s digital marketing capabilities, lower the cost to acquire customer accounts and aid it in becoming a holistic education solutions provider for students.
Cost Management Efforts: Though Sallie Mae’s non-interest expenses increased in 2019, the same declined at a CAGR of 2.3% over the last four years (ended 2021). The company has been making efforts to lower its expenses by reducing servicing and acquisition costs. Further, it focuses on gaining efficiencies from operations.
Superior Return on Equity (ROE): Sallie Mae’s ROE of 57.49% compared with the industry average of 22.59% highlights the company’s commendable position over its peers.
Image: Bigstock
Here Are 6 Reasons Why Sallie Mae (SLM) Stock Is Worth Buying
Sallie Mae (SLM - Free Report) appears to be a solid bet given its dominant position as an education loan provider. It is expected to benefit from growth in enrollments in the near term. The company is also inclined to reduce expenses while gaining efficiencies from operations.
Analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for 2022 and 2023 earnings has been revised 4.6% and 4% upward, respectively, over the past 30 days. Sallie Mae currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, shares of the company have rallied 23.6% over the past year compared with an 18% rise recorded by the industry.
Image Source: Zacks Investment Research
6 Reasons Why Sallie Mae is a Must Buy Now
Earnings Growth: Sallie Mae witnessed earnings growth of 46.7% in the past three to five years, higher than the industry average of 20.2%. While the company’s earnings are projected to decline 19.9% for 2022, they are expected to witness growth of 7.4% in 2023.
Sallie Mae’s earnings beat the Zacks Consensus Estimate in each of the four trailing quarters, with the average being 34.38%.
Revenue Growth: Sallie Mae’s rising average loan balance and yields on cash and other short-term investments have supported net interest income (NII) growth. Though the NII declined in both 2020 and 2021, the same witnessed a CAGR of 5.4% over the last five years (ended 2021). The company’s aim to grow the private education loan portfolio is expected to support its NII in the future.
Private education loan originations witnessed a CAGR of 3.1% in the six-year period (2016-2021). Management projects an 8%-10% increase in private education loan originations this year.
Sallie Mae’s 2022 revenues are projected to grow 5.9%, whereas 2023 revenues will likely grow 2.9%.
Dominant Player: Sallie Mae is the dominant player in providing student loans, which gives it a competitive advantage of scale. Strengthening of the U.S. economy and anticipated spring semester demand will drive higher demand for education loans. The company expects to sell loans worth $3 billion in 2022, $1 billion in the first quarter and $2 billion in the third quarter of the year.
Opportunistic Acquisitions: Sallie Mae is expanding its business operations through investments in different product offerings and acquisitions. In January 2022, it inked a deal with Epic Research LLC to acquire Nitro College. The deal will bolster the company’s digital marketing capabilities, lower the cost to acquire customer accounts and aid it in becoming a holistic education solutions provider for students.
Cost Management Efforts: Though Sallie Mae’s non-interest expenses increased in 2019, the same declined at a CAGR of 2.3% over the last four years (ended 2021). The company has been making efforts to lower its expenses by reducing servicing and acquisition costs. Further, it focuses on gaining efficiencies from operations.
Superior Return on Equity (ROE): Sallie Mae’s ROE of 57.49% compared with the industry average of 22.59% highlights the company’s commendable position over its peers.
Other Stocks Worth Considering
A couple of other stocks from the finance space worth a look are Morgan Stanley (MS - Free Report) and First Business Financial Services (FBIZ - Free Report) . Morgan Stanley carries a Zacks Rank #2 while FBIZ sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Morgan Stanley’s current-year earnings has been revised 4.2% upward over the past 60 days.
MS’s shares have risen 14.6% in the past year.
First Business recorded an upward earnings estimate revision of 9% for 2022 over the past 60 days.
The FBIZ stock has jumped 44.7% in the past year.