6 Fintech Stocks to Buy on the Dip

  • These are  six fintech stocks to buy on the dip. The financial technology arena has been hit hard. They are all now cheap with low P/Es and high dividend yields. That presents a unique buying opportunity for the likely survivors.
  • Upstart Holdings (UPST): Upstart runs an AI-based cloud lending referral platform. The stock is cheap at 15.4x earnings and given forecast earnings growth next year it falls to 10x.
  • OneMain Holdings (OMF): This direct lender and insurance company makes extraordinary profits in car loans and loans to lower credit quality borrowers. The company pays a high dividend and its yield is over 10% with a very low P/E of just 4.4x.
  • SLM Corporation (SLM): This fintech lender makes traditional student loans and also offers traditional banking products like saving accounts, etc. It is also one of the cheapest stocks on this list at 5.4x earnings and a 2.84% dividend yield. Analysts forecast a 33.9% higher price target.
  • Nelnet Inc (NNI): this loan servicing and payment processing company trades for 12.5 times earnings but those earnings are forecast to be flat for the year. Between its 1% yield and a 2.6% buyback yield, the total yield to shareholders is over 3.7%.
  • Navient Corp (NAVI): This education loan management and business processing company is cheap at just 4.4x earnings and a 4.8% dividend yield. However, including its 21% annual buyback yield, the stock has a total yield over 25%. That makes it one of the best fintech stocks to buy on the dip.
  • The Western Union Co (WU): the global payments and money transfer company is very profitable, expecting earnings to rise over 7% next year, putting the stock on a forward multiple of 9x and 5.83% dividend yield. In addition, its buyback yield is over 9.7%, giving investors in the stock a total yield of 15.5%,
Fintech Stocks to Buy on the Dip - 6 Fintech Stocks to Buy on the Dip

Source: Wright Studio / Shutterstock.com

It turns out that Fintech (financial technology) is a war zone now. I found six Fintech stocks to buy on the dip. These stocks are down significantly from their highs, yet all of them are profitable. They are all cheap now on a P/E basis, and all of them, except one, pay dividends.

That presents a unique buying opportunity for the likely survivors. This article will dive into some of the more probable winners.

You can see from the chart on the right that the average P/E of these fintech stocks has a price-to-earnings (P/E) multiple of 8.3x. Most of the companies have lower earnings projections for 2023, so the P/E falls for 2023 to 7.7x.

7-14-22 - Undervalued Fintech Stocks
Click to Enlarge
Source: Mark R. Hake, CFA

Moreover, the average dividend yield for this group of fintech stocks is over 4%. That makes them quite interesting to value investors.

This is a higher than average dividend yield than most other stocks. This is also one more reason to buy these fintech stocks on the dip.

Let’s dive in and look at these stocks.

UPST Upstart Holding $24.42
OMF OneMain Holdings $39.05
SLM SLM Corporation $15.7
NNI NelNet Inc $89.93
NAVI Navient Corp $14.9
WU The Western Union Company $16.35

Upstart Holdings (UPST)

In this photo illustration the Upstart (UPST) logo seen displayed on a smartphone screen
Source: rafapress / Shutterstock.com

Market Cap: $2.13 billion

Upstart Holdings (NASDAQ:UPST) runs an AI (artificial intelligence) based lending referral platform essentially sending borrowers to various banks and loan partners and collecting a fee. This makes the company very profitable.

For example, analysts now forecast that its earnings per share (EPS) will hit $1.48 in 2022 and rise 43% in 2023 to $2.18per share. That lowers its P/E multiple down to 10.7x from over 15.4x in 2022.

This more than makes up for the fact that the company does not pay a dividend. All the other fintech stocks on this list pay good dividends to their shareholders.

OneMain Holdings (OMF)

Man calculating finances on calculator. Finance. Finance stocks.
Source: wutzkohphoto / Shutterstock

Market Cap: $4.18 billion

OneMain Holdings (NYSE:OMF) is a financial lender and an insurance company that makes loans to lower credit quality borrowers and for auto loans. The company is extremely profitable and is likely to continue to be, recession or not.

Analysts forecast earnings this year of $8.60 per share, and just slightly lower at $8.54 next year. This puts OMF stock on a very low forward P/E multiple of just 4.4x for both years.

Moreover, the company pays a dividend of $3.80 per share, so earnings still cover it very well. Its payout ratio is reasonable at just 44%. More importantly, its dividend yield, is 10%. This looks sustainable as long as earnings stay level next year.

This makes OMF stock one of the best fintech stocks to buy on the dip going forward.

SLM Corporation (SLM)

Three people sit around a table holding financial charts and a tablet device.
Source: Shutterstock

Market Cap: $4.21 billion

SLM Corporation (NASDAQ:SLM) makes and services private education loans and offers traditional banking products like saving accounts to its customers. The company is now very profitable and analysts forecast rising 5.9% from $2.87 in 2022 to $3.04 in 2023.

That puts the stock at today’s price (July 14) of $15.47 on a low P/E of just 5.4x, falling to 5.1x for the 2023 earnings year. This is very cheap indeed and seems to reflect market fears about declining earnings, which so far are not in analysts’ forecasts.

Moreover, its dividend of 44 cents is more than covered by earnings, as you see. This gives the stock an attractive 2.84% dividend yield.

Analysts surveyed by TipRanks now project that SLM stock is worth $20.71, or +33.9% over today’s price. That makes it one of the best fintech stocks to buy on the dip on this list.

NelNet Inc (NNI)

financial security concept image
Source: Lev Kropotov / Shutterstock.com

Market Cap: $3.37 billion

NelNet Inc (NYSE:NNI) is a loan servicing and payment processing company with inbound call centers and software sales to independent lenders and funds management companies. Its business is very profitable as well.

For example, analysts now forecast earnings will hit $7.09 this year and stay basically level next year. As a result, at today’s price of $89.77, the stock is at 12.2x earnings.

Moreover, its earnings more than cover the annual 96-cent dividend per share. For example, this makes the dividend payout ratio very low at just 13.5% of its earnings. As a result, its annual dividend yield is 1.07%. It clearly could afford to pay a higher dividend if it wanted to.

On the other hand, NelNet has been buying back its own shares. In the last year, it repurchased $89 million of stock. That represents 2.64% of its market value. Therefore its total yield is over 3.7% annually to shareholders.

That makes it one of the top fintech stocks to buy on the dip.

Navient Corp (NAVI)

Source: Shutterstock

Market Cap: $2.20 billion

Navient Corp (NASDAQ:NAVI) is an education loan management and business processing solutions company whose earnings are forecast to decline slightly next year. But that makes the stock very cheap now.

For example, EPS is forecast to drop from $3.30 to $3.03 by 2023. Not to worry though, since this puts NAVI stock on a very inexpensive P/E multiple of just 4.4x for 2022 and 4.8x for 2023. That makes it one of the cheapest fintech stocks on this list.

Moreover, the company’s earnings more than cover its 64-cent dividend per share. That means its has a low payout ratio of just 19.3%. Even if earnings fell by 50%, the payout ratio would still be below 50% at just 38%. In other words, the company is still likely to keep paying the dividend no matter what.

That is important since the dividend yield is now high at 4.38%. This is one of the reasons why the average yield of this whole group is over 4%. In addition, last quarter it bought back $115 million of its own shares. That puts the stock on a run rate of $460 million in annual repurchases, or 21% of its stock market value.

As a result, between its 4.38% dividend yield and the 21% buyback yield, the total shareholder yield is over 25%.

In addition, six analysts surveyed by TipRanks have an average price target of $18.5, or 24% over today’s price. These factors make it one of the best fintech stocks on this list.

The Western Union Co (WU)

Logo/electronic sign for Western Union (WU)
Source: 360b / Shutterstock.com

Market Cap: $6.36 billion

The Western Union Company (NYSE:WU) is a well-known money global transfer company that operates in two segments: consumer and enterprise. Earnings are growing nicely as analysts project they will grow 7.3% from $1.79 this year to $1.92 next year.

This puts the stock on an inexpensive forward multiple of just 9.2x and it falls to 8.4x next year. Moreover, its dividend of 94 cents is just 53% of its 2022 earnings forecast and even lower at 49% for 2023. It also means that the dividend yield is now high at 5.7%.

On top of that last quarter, WU bought back $154 million of its own shares. On an annualized basis ($616 million), it works out to 9.7% of its $6.36 billion market cap. So, including the 5.7% dividend yield, shareholders get a total yield of over 15.5% annually.

No wonder TipRanks reports that 10 analysts have an average price target of $18.22, or 12% over today’s price. This puts it high on the list of fintech stocks to buy on the dip.

On the date of publication, Mark Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com, Newsbreak.com and Beehiiv.com.


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