Boost Your Portfolio With These Top 3 Consumer Loan Stocks
Zacks Investment Research | Sep 03, 2021 04:58AM ET
With the S&P 500 Index surpassing 4,500 points, it is time to take a look at one of its well-performing sectors, which is Consumer Loans. Performance of the Zacks WRLD .
Before we proceed to discuss these stocks’ fundamental strengths and prospects, let’s take a look at the chart showing the year-to-date share price movement of these companies.
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Credit Acceptance Corporation: Headquartered in Southfield, MI, the company offers financing programs, and related products and services to automobile dealers in the United States, enabling them to sell vehicles to consumers, irrespective of their credit history. Also, it is engaged in the business of reinsuring coverage under the vehicle service contracts sold to consumers by dealers on vehicles financed by the company.
With the economy re-opening and gathering steam, the company’s finance charges are likely to continue improving, supported by a rise in demand for auto loans. Further, a decent spurt in dealer enrolments and higher active dealers are expected to support top-line growth.The company’s steady capital deployments are laudable, through which it will keep enhancing its shareholder value.
Credit Acceptance’s earnings estimates have moved 24% north for 2021 in 60 days’ time, indicating an increase of 108.9% from the year-ago reported figure. Likewise, the 2022 earnings estimates have also been revised 2.1% upward over the same time frame. The stock sports a Zacks Rank #1, currently.
World Acceptance Corporation: It operates as a small-loan consumer finance business. The company provides short-term small installment loans, medium-term larger installment loans, related credit insurance, and ancillary products and services to individuals. It also offers income-tax return preparation services to its loan customers and other individuals.
It is well-positioned to leverage the favorable supply and demand imbalance within the non-prime lending arena. With loan growth and credit trending in the right direction, World Acceptance’s strong cash flows permitted its operations at low leverage levels. The firm imparts simple and alluring products to an underserved customer base, zooming in on the particular customer's stability, ability and willingness to pay back the loans. No state has greater than a 21% loan concentration, thereby portraying loan diversification, geographically. This apart, its detailed underwriting skills coupled with a robust collection process led to rapid portfolio growth in recent years.
Earnings estimates have been revised 24.9% and 29.5% upward for 2021and 2022, respectively, in the past two months. Also, the stock flaunts a Zacks Rank of 1, presently.
Ally Financial: The company provides a broad array of financial products and services, primarily to automotive dealers and their customers. This Detroit, MI-based company is diversifying into mortgage business and wealth management services, and making efforts to enhance its digital offerings. The acquisitions of TradeKing and Health Credit Services (a point-of-sale payment provider) will likely help improve its product pipeline.
Strong origination volumes, retail loan growth, rich deposit balances and inorganic growth endeavors with an aim to enrich its product menu will continue to bump up Ally Financial’s prospects. Also, the company’s balance-sheet strength and sturdy capital deployments are its key catalysts.
The Zacks Consensus Estimate for 2021 earnings has moved 26% north to $8.18 in two months’ time. It implies a surge of 169.97% from the year-ago reported figure. Likewise, the consensus estimate for 2022 earnings has been revised 12.3% upward over the same time frame. The stock carries a Zacks Rank #2, presently.
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