3 financial services stocks to buy and 1 to sell

The consumer price index (CPI) rose 8.3% year over year in August, beating economists’ estimates. Stubborn inflation should prompt the Fed to continue raising interest rates aggressively, which could trigger a recession.

With inflation nearing multi-decade highs and the labor market remaining tight, the Fed has aggressively raised interest rates this year to drive down prices. Although the rise in rates affected most sectors, it helped financial companies to increase their income, which is positively correlated with interest rates.

Additionally, digital transformation has helped financial service providers simplify monetary transactions. According to the Business Research Company, the global financial services market is expected to grow at a CAGR of 9.6% for $37.34 trillion by 2026.

With interest rates expected to rise further, investors could invest in fundamentally sound financial services stocks WNS (Holdings) Limited (SMB), Everi Holdings Inc. (ERI) and Forrester Research, Inc. (FORR). However, avoid Marathon Digital Holdings, Inc. (MARA) due to its inability to take advantage of rising rates.

Stocks to buy:

WNS (Holdings) Limited (SMB)

Based in Mumbai, India, WNS is a business process management (BPM) company that operates through the WNS Global BPM and WNS Auto Claims BPM segments. It offers its solutions to industry-specific clients, customer experience services, finance and accounting, human resources, procurement, as well as research and analytics to reinvent the digital future of business.

On July 1, 2022, WNS acquired Vuram, a global leader in enterprise automation services. With this acquisition, the company expands its intelligent automation capabilities to realize its short- and long-term strategic plans.

WNS revenue increased 16.6% year-on-year to $295.30 million for the first quarter ended June 30, 2022. The company’s non-GAAP operating income increased 17.7 % YoY to reach $57.90 million. Additionally, its non-GAAP net income rose 17.7% year over year to $45.90 million. Additionally, its Adjusted EPS came in at $0.90, representing an 18.4% year-over-year increase.

Analysts expect WNS EPS for the quarter ending Dec. 31, 2022 to rise 7.1% year-over-year to $0.73. Its revenue for the quarter ending December 31, 2022 is expected to increase 10.2% year-over-year to $287.71 million. He passed Street PES estimates for each of the last four quarters. Over the past three months, the stock has gained 23.7% to close the last trading session at $83.35.

WNS’ POWR Rankings reflect strong prospects. According to our proprietary rating system, it has an overall rating of B, translating into a purchase. POWR ratings rate stocks on 118 different factors, each with its own weighting.

It has an A rating for feeling and a B for stability and quality. It is ranked #8 out of 107 stocks in the Financial Services (Corporate) industry. Click here to see WNS’s other ratings for growth, value and momentum.

Everi Holdings Inc. (ERI)

EVRI is a provider of creative entertainment and technology solutions for the casino and digital gaming industry. The Company operates through two segments: gaming and financial technology solutions (FinTech). It provides gaming operators with financial technology products and services.

On May 3, 2022, EVRI acquired Intuicode Gaming Corporation, a private game development and engineering company focused on historical horse racing (HHR) games. With this acquisition, EVRI plans to leverage the additional expertise to accelerate entry and growth in the expanding HRH market.

For the fiscal second quarter ended June 30, 2022, EVRI’s revenue increased 14.3% year-over-year to $197.20 million. Its operating profit rose slightly from the year-ago quarter to $54.50 million. The company’s adjusted EBITDA was $94.40 million, up 2.1% year-over-year. Additionally, its free cash flow improved 26.3% year over year to $49.50 million.

The consensus revenue estimate of $194.37 million for the third quarter ending September 30, 2022 represents growth of 15.5% over the same period last year. The consensus EPS estimate of $0.34 for the current quarter indicates a 388.3% year-over-year increase.

The stock has gained 7% over the past three months to close the last trading session at $17.74.

EVRI’s strong fundamentals are reflected in its POWR ratings. The stock’s overall A rating translates to a strong buy in our proprietary rating system.

It has a B rating for value, feeling and quality. Within the same industry, it is ranked #2. To see EVRI’s other ratings for growth, momentum, and stability, Click here.

Forrester Research, Inc. (FORR)

FORR is an independent research and consultancy firm operating in the research, consultancy and events segments. Its leading subscription-based research product provides clients with access to its research designed to inform their strategic decision-making.

On June 7, 2022, the company announced Forrester Decisions for Digital Business & Strategy, a new research service designed to help digital leaders across industries deliver enterprise-wide digital strategies to increase acquisition. customers and profitability. The service addresses the top priorities of digital leaders to deliver stronger CX and drive customer loyalty and retention.

During the second fiscal quarter ended June 30, 2022, FORR’s net revenue increased 15.2% year-over-year to $148.25 million. Its adjusted operating profit rose 41.8% from the prior year’s value to $27.89 million, while its adjusted net profit rose 51.4% from the period. from the previous year to reach $19.22 million. Additionally, FORR’s non-GAAP EPS was $1, recording a 51.5% year-over-year increase.

Analysts expect FORR’s FY2022 EPS to rise 10% year-over-year to $2.30. Its revenue for the quarter ending September 30, 2022 is expected to increase 7.3% year-over-year to $126.80 million. The stock has exceeded consensus EPS estimates in each of the past four quarters.

Shares of FORR are down 13.2% over the past month to close the latest trading session at $38.58.

FORR’s POWR ratings reflect a strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

It has an A rating for growth, sentiment and quality and a B for value and stability. In the financial services industry (enterprise), it is ranked first. Click here to see FORR’s rating for Momentum.

Stock for sale:

Marathon Digital Holdings, Inc. (MARA)

MARA is a digital asset company that focuses on the blockchain ecosystem and the generation of digital assets. The company holds bitcoins in an investment fund.

On August 1, 2022, MARA expanded its credit facility by increasing its existing debt financing capacity by $100 million. This credit facility is expected to increase the company’s debt burden.

MARA’s revenue for the second fiscal quarter ended June 30, 2022 decreased 15% year over year to $24.92 million. Its operating loss rose 61.6% from the previous year’s value to $178.21 million. The company’s net loss was $191.65 million, up 76% from the prior year period, while its Adjusted EBITDA loss increased 40.1% in year-over-year to reach $147.20 million. Additionally, its loss per share widened 60.5% year over year to $1.75.

Analysts expect MARA’s EPS to remain negative for fiscal 2022. Its revenue for the quarter ending September 30, 2022 is expected to decline 46.1% year-over-year for reach $27.85 million. It has failed to beat consensus EPS estimates in each of the past four quarters. The stock has lost 66.3% over the past nine months to close the last trading session at $12.07.

MARA’s weak fundamentals are reflected in its POWR ratings. It has an overall rating of F, which equates to a strong sell in our proprietary rating system.

It has an F rating for Growth, Value, Stability, Sentiment and Quality. Click here to see MARA’s rating for Momentum.

WNS shares were trading at $82.94 per share on Friday afternoon, down $0.41 (-0.49%). Year-to-date, the WNS is down -5.99%, compared to a -18.22% rise in the benchmark S&P 500 over the same period.

About the Author: Shweta Kumari

Shweta’s deep interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make informed investment decisions. After…

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