Financial firms serve as the backbone of the economy, providing essential services from lending and investment management to risk management and payment processing. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have caused the industry to lag recently as financials stocks have collectively shed 4.6% over the past six months. This drop is a noticeable divergence from the S&P 500’s 11% return.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. On that note, here is one resilient financials stock at the top of our wish list and two we’re steering clear of.
Two Financials Stocks to Sell:
Sixth Street Specialty Lending (TSLX)
Market Cap: $1.64 billion
Originally launched as TPG Specialty Lending before rebranding in 2020, Sixth Street Specialty Lending (NYSE:TSLX) is a business development company that provides customized financing solutions to middle-market companies across various industries.
Why Is TSLX Risky?
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Annual sales declines of 3.7% for the past two years show its products and services struggled to connect with the market during this cycle
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Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
Sixth Street Specialty Lending is trading at $17.42 per share, or 10.3x forward P/E. Read our free research report to see why you should think twice about including TSLX in your portfolio, it’s free.
Sallie Mae (SLM)
Market Cap: $4.08 billion
Originally created as a government-sponsored enterprise before privatizing in 2004, Sallie Mae (NASDAQ:SLM) is a financial services company that provides private education loans, savings products, and educational resources to help students and families pay for college.
Why Are We Wary of SLM?
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Sales were flat over the last two years, indicating it’s failed to expand this cycle
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Earnings growth underperformed the sector average over the last five years as its EPS grew by just 3.1% annually
At $21.35 per share, Sallie Mae trades at 8.4x forward P/E. Check out our free in-depth research report to learn more about why SLM doesn’t pass our bar.
One Financials Stock to Watch:
Raymond James (RJF)
Market Cap: $28.56 billion
Founded in 1962 and headquartered in St. Petersburg, Florida, Raymond James Financial (NYSE:RJF) is a diversified financial services company that provides wealth management, investment banking, asset management, and banking services to individuals and institutions.