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
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