Quite a few consumer lending stocks have continued to bounce back among the broader financial sector with names like LendingTree TREE, Ally Financial ALLY, Synchrony Financial SYF, and OneMain Holdings OMF starting to simmer.
Soaring near the $50-a-share range, OneMain’s stock has certainly stood out with LendingTree, Ally, and Synchrony shares still under $40 despite their recent rallies. With that being said, let’s see if now is a good time to buy OneMain’s stock for the possibility of higher highs.
Why OneMain’s Stock Stands Out
OneMain has become a popular financial service holding company through its offerings of personal loans, credit cards, optional credit insurance, and a financial wellness program. OneMain’s very reasonable valuation has kept investors intrigued amid the recent surge in OMF shares which still trade at just 7.2X forward earnings.
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This is despite OneMain expected to round out its fiscal 2023 with EPS at $5.37 per share compared to $7.32 a share in 2022. However, FY24 EPS is projected to rebound and soar 25% to $6.72 per share. Total sales are projected to be up 2% in FY23 and rise another 5% in FY24 to $3.73 billion. The steady top line growth serves as a positive affirmation that OneMain’s earning potential will remain compelling as easing inflation leads to more attractive interest rates for consumers and hopefully lower operating cost.
More impressive and perhaps most compelling to investors is that OneMain has been able to sustain its lofty dividend with a current yield of 8.17% which towers over the Zacks Financial-Consumer Loans Markets’ 2.2% and the S&P 500’s 1.4% average. Furthermore, OneMain has now increased its dividend seven times in the last five years with a 44.47% annualized dividend growth rate during this period.
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Recent Performance
Like Synchrony and Ally Financial, OneMain’s stock has hovered near its 52-week highs hitting this mark at $49.89 a share in late December. Still at just over $49, OneMain’s stock has soared +36% over the last year to top the S&P 500’s +22%, Synchrony’s +21%, and even beat Ally’s +33% while roughly matching LendingTree’s strong price performace.
Even better, when including dividends, OneMain’s total return over the last year is +50% to easily outperform the benchmark and many of its consumer lending peers.
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Bottom Line
For now, OneMain Holdings’ stock lands a Zacks Rank #3 (Hold). OneMain’s valuation and lucrative dividend yield remain enticing to income investors but more upside in OMF shares may largely depend on the company’s fourth quarter results in early February.
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OneMain Holdings, Inc. (OMF) : Free Stock Analysis Report
LendingTree, Inc. (TREE) : Free Stock Analysis Report
Ally Financial Inc. (ALLY) : Free Stock Analysis Report
Synchrony Financial (SYF) : Free Stock Analysis Report
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