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Navient Rewards Shareholders With Additional Share Buyback

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Navient Corporation (NAVI - Free Report) announced that its board of directors have given consent to an additional share buyback program of up to $500 million with immediate effect, in order to enhance its shareholders’ value.

This new share repurchase authorization comes with no expiration date. Moreover, it is in addition to the $80-million unused buyback authorization that was approved in December 2016.

Per the authorization, the company is allowed to perform buybacks from time to time through a combination of open-market repurchases, privately negotiated transactions, accelerated share repurchases or other similar transactions.

Though these initiatives to increase shareholders’ wealth look encouraging, Navient’s debt/equity compares unfavorably with peers, which indicates that these capital deployment activities might not be sustainable.

However, capital deployment activities are not the only factor to be considered while judging a company. Investors interested in this Zacks Rank #3 (Hold) stock can have a look at its fundamentals and growth opportunities.

Earnings Per Share Strength: Earnings are anticipated to display an upswing in the near term, as the company’s projected EPS growth (F1/F0) is 7.26%. Also, Navient pulled off an average positive earnings surprise of 3.01% over the trailing four quarters.

Inorganic Growth Routes: Navient remains focused on undertaking inorganic growth strategies that are anticipated to drive overall growth. In November 2017, it acquired Earnest, a financial technology and education-finance company, serving consumers who are unable to get finance from traditional banks.

Superior Return on Equity (ROE): Navient’s ROE of 13.95%, compared with the industry average of 13%, underlines the company’s commendable position over peers.

Stock is Undervalued: The stock seems undervalued compared with the broader industry. Its current price-to-book and price-earnings (F1) ratios are lower than the respective industry averages. Notably, the stock has a Value Score of B.

Backed by these strong fundamentals, Navient’s shares have gained 3% so far this year against 4% decline of the industry it belongs to.

 


 

Nevertheless, continuously rising expenses remain a key concern for Navient. Its expenses witnessed a CAGR of 2.6% over the past three years (2015-2017). The trend continued in the first half of 2018 as well. Also, substantial volatility in the capital markets could increase Navient’s financing costs.

Stocks to Consider

The Zacks Consensus Estimate for Enova International’s (ENVA - Free Report) earnings for the current year has been revised 2.4% upward in the past 60 days. Also, its share price has surged more than 150% over the past year. Currently, it flaunts a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CURO Group Holdings Corp. (CURO - Free Report) currently has a Zacks Rank of 2. Its earnings estimates for 2018 have been revised 3.4% upward over the past 60 days. Further, the company’s shares have gained more than 110% in the past year.

The Zacks Consensus Estimate for Credit Acceptance Corporation’s (CACC - Free Report) earnings for 2018 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 stock currently flaunts a Zacks Rank of 1.

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