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4 Reasons to Add Navient (NAVI) Stock to Your Portfolio Now
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Adding the Navient Corporation (NAVI - Free Report) stock to your portfolio seems to be a wise idea now. Supported by strong fundamentals, the company is well-poised for growth.
The Zacks Consensus Estimate for NAVI’s 2023 earnings has been revised 1.4% upward over the past week, indicating that analysts are optimistic regarding its earnings growth potential. NAVI currently sports a Zacks Rank #1 (Strong Buy).
Over the past six months, the stock has declined 8.5% against the industry’s growth of 6.4%.
Image Source: Zacks Investment Research
Let’s delve into the other factors that make NAVI an attractive investment option now.
Expense Reduction: Navient aims to improve operating efficiency by undertaking various cost-control initiatives. The company’s expenses declined, seeing a compound annual growth rate (CAGR) of 6.6% over the last three years (ended 2022). Though the downtrend reversed in the first nine months of 2023 due to increased regulatory expenses in the third quarter of 2023, ongoing efforts for expense reduction remain encouraging. Going forward, we expect expenses to reduce, thereby aiding the company’s bottom-line growth.
Recurring Revenue Business Model: Navient’s recurring revenue business model also aids top-line growth. The company’s education loan portfolio generates significant cash flows. Undiscounted projected cash flows from Federal Education Loans and Consumer Lending are $6.4 billion and $6.9 billion, respectively, over the next 20 years.
Focusing on In-School Originations: The company has been focusing on in-school originations to drive its loan volumes. In the third quarter of 2023, it reduced its acquisition costs on such loans. This will likely generate higher returns for the company.
While high interest rates have limited demand for refinance loans, refinance loan origination volumes are likely to rebound with the resumption of direct federal loan repayments from October 2023. This is likely to provide Navient with an opportunity to capitalize on borrowers looking to refinance loans, thereby supporting its top-line growth in the upcoming period.
Superior Return on Equity (ROE): Navient’s ROE of 14.61% is higher than the industry average of 11.14%. This highlights the company’s commendable position over its peers in using shareholders’ funds.
Earnings estimates for IBCP have increased marginally for 2023 over the past 30 days to $2.87. The company’s shares have gained 45.8% over the past six months.
Earnings estimates for EBMT have been unchanged for 2023 at $1.35 over the past 60 days. In the past six months, the company’s shares have improved 10.7%.
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4 Reasons to Add Navient (NAVI) Stock to Your Portfolio Now
Adding the Navient Corporation (NAVI - Free Report) stock to your portfolio seems to be a wise idea now. Supported by strong fundamentals, the company is well-poised for growth.
The Zacks Consensus Estimate for NAVI’s 2023 earnings has been revised 1.4% upward over the past week, indicating that analysts are optimistic regarding its earnings growth potential. NAVI currently sports a Zacks Rank #1 (Strong Buy).
Over the past six months, the stock has declined 8.5% against the industry’s growth of 6.4%.
Image Source: Zacks Investment Research
Let’s delve into the other factors that make NAVI an attractive investment option now.
Expense Reduction: Navient aims to improve operating efficiency by undertaking various cost-control initiatives. The company’s expenses declined, seeing a compound annual growth rate (CAGR) of 6.6% over the last three years (ended 2022). Though the downtrend reversed in the first nine months of 2023 due to increased regulatory expenses in the third quarter of 2023, ongoing efforts for expense reduction remain encouraging. Going forward, we expect expenses to reduce, thereby aiding the company’s bottom-line growth.
Recurring Revenue Business Model: Navient’s recurring revenue business model also aids top-line growth. The company’s education loan portfolio generates significant cash flows. Undiscounted projected cash flows from Federal Education Loans and Consumer Lending are $6.4 billion and $6.9 billion, respectively, over the next 20 years.
Focusing on In-School Originations: The company has been focusing on in-school originations to drive its loan volumes. In the third quarter of 2023, it reduced its acquisition costs on such loans. This will likely generate higher returns for the company.
While high interest rates have limited demand for refinance loans, refinance loan origination volumes are likely to rebound with the resumption of direct federal loan repayments from October 2023. This is likely to provide Navient with an opportunity to capitalize on borrowers looking to refinance loans, thereby supporting its top-line growth in the upcoming period.
Superior Return on Equity (ROE): Navient’s ROE of 14.61% is higher than the industry average of 11.14%. This highlights the company’s commendable position over its peers in using shareholders’ funds.
Other Stocks Worth Considering
A couple of other top-ranked stocks from the finance space are Independent Bank (IBCP - Free Report) and Eagle Bancorp Montana, Inc. (EBMT - Free Report) , each currently sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for IBCP have increased marginally for 2023 over the past 30 days to $2.87. The company’s shares have gained 45.8% over the past six months.
Earnings estimates for EBMT have been unchanged for 2023 at $1.35 over the past 60 days. In the past six months, the company’s shares have improved 10.7%.