Given the swift expansion of consumer finance driven by digitization and fintech innovation, it seems wise to invest in robust stocks FirstCash Holdings, Inc. (FCFS), Yiren Digital Ltd. (YRD) and Regional Management Corp. (RM), that align with the industry's growth trajectory. Let’s understand this in more detail.

Consumer financial services comprise an extensive spectrum of offerings and amenities targeted to the needs of individuals and households. These services include current and savings accounts, internet payment options, credit and debit cards, mortgages, commercial loans, securitizations, and more.

Digitalization, with a strong emphasis on cloud technologies, is quickly becoming one of the industry's most prominent themes. It offers frictionless, very efficient client service and necessitates reallocating funds. This change would boost the industry's competitiveness, adaptability, and customer-centricity.

The fintech sector is also undergoing rapid development, with intelligent automation, AI-powered advice, and asset management emerging as some of the most significant themes. Concurrently, blockchain integration, embedded banking, and neobanking continue to ride the wave of development and progress.

That said, working with Fintechs allows banks to provide value-added solutions to their customers that fall outside their areas of expertise. Banks can expand their services at minimal cost and accelerate time to market by utilizing alternative data sets and models for improved underwriting and providing instantaneous money transfers to customers.

Meanwhile, the worldwide consumer finance business is seeing increased access to loans and credit via digital payment channels, which is creating lucrative growth potential. According to a report from Blue Weave Consulting, the global consumer finance market is expected to achieve a CAGR of 7.1%, reaching $1.96 trillion by 2029.

In light of these encouraging trends, let’s look at the fundamentals of the three consumer finance stocks.

FirstCash Holdings, Inc. (FCFS)

FCFS operates retail pawn stores, offering loans secured by pledged personal property. Additionally, the company provides retail point-of-sale payment solutions, emphasizing lease-to-own products and supporting various financing payment options for traditional and e-commerce merchant partners in its network.

In its fiscal third-quarter report, FCFS unveiled the incorporation of 104 pawn stores, comprising 79 acquired U.S. locations and 25 newly established stores, primarily in Latin America. The company is currently poised to surpass the target of adding over 150 pawn stores for the entire year.

With robust demand in existing locations and substantial unit growth in pawn establishments, FCFS anticipates a surge in both revenue and earnings in the upcoming fourth quarter and beyond.

For the third quarter that ended September 30, 2023, FCFS’ non-GAAP revenue increased 15.8% year-over-year to $786.30 million. Its non-GAAP EBITDA rose 22.2% from the year-ago value to $132.99 million.

In addition, the company’s non-GAAP net income and non-GAAP EPS grew 15.9% and 20% from the prior year’s period to $70.78 million and $1.56, respectively.

For the fiscal fourth quarter ending December 2023, the company’s revenue is estimated to grow 13.7% year-over-year to $851.91 million. Similarly, FCFS’ EPS for the current quarter is expected to rise 10.9% from the prior year’s period to $1.83. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.

Shares of FCFS have gained 17.4% over the past six months and 29.6% year-to-date, closing the last trading session at $114.05.

FCFS’ solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

FCFS has a B grade for Momentum, Stability, and Sentiment. It has ranked #9 out of 47 stocks within the Consumer Financial Services industry.

In addition to the POWR Ratings I’ve highlighted, you can see FCFS’ ratings for Growth, Value, and Quality here.

Yiren Digital Ltd. (YRD)

Based in Beijing, China, YRD functions as an online consumer finance marketplace linking borrowers and investors. Its services encompass loan facilitation, post-origination services, and the distribution of short-term cash management and insurance products. The company's segments include Wealth; Credit; and Other.

On June 27, YRD disclosed its entry into an equity transfer agreement to acquire the entire equity interest (100%) in Chongqing Jintong Financing Guarantee Co., Ltd., a licensed financing guarantee company in China. The acquisition involves a total cash consideration of RMB 204.9 million ($28.73 million).

Upon the successful acquisition of Chongqing Jintong, YRD gained the capacity to offer financing guarantee services through this entity. The strategic move is expected to enhance YRD's loan facilitation business in China, optimize its service portfolio, and expedite the overall pace of its business development.

For the third quarter that ended September 30, 2023, YRD’s net revenue increased 55.9% year-over-year to $179.66 million. Its adjusted EBITDA rose 89.8% from the year-ago value to $94.94 million. Furthermore, the company’s net income and income per share grew 105.1% and 106.8% from the prior year’s quarter to $75.99 million and $0.43, respectively.

YRD has gained 47.5% over the past month and 135.3% over the past year, closing the last trading session at $3.20.

YRD’s strong prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

YRD has an A grade for Value and Quality and a B for Sentiment and Momentum. It has topped the 8-stock A-rated Foreign Consumer Finance industry.

Click here to access the additional YRD ratings (Stability and Growth). 

Regional Management Corp. (RM)

RM is a diversified consumer finance company catering mainly to customers with restricted access to credit. It provides a range of installment loan products, including small and large installment loans. Additionally, the company offers retail loans designed to finance the acquisition of furniture, appliances, and various retail products.

On March 22, RM announced the initiation of lending operations in Arizona, marking its entry into the 19th U.S. state. This move positions RM for expanded operations in the southwestern United States. and also facilitates the extension of its geographical reach, presenting strategic benefits for the company.

During the third quarter that ended September 30, 2023, RM’s total revenue increased 7.2% year-over-year to $140.88 million. In addition, as of September 30, 2023, the company’s cash grew 136.1% from the year-ago value to $7.41 million, while total assets amounted to $1.77 billion, up 9.9% from the prior year’s period.

The consensus revenue estimate of $143.84 million for the fiscal 2024 first quarter ending March 2024 reflects a 6.3% year-over-year improvement. Likewise, the consensus EPS estimate of $1.07 for the next quarter exhibits a 19.2% rise from the previous year’s period. Also, the company topped the consensus revenue and EPS estimates in all of the trailing four quarters.

Over the past five days, the stock has gained 9.3% to close the last trading session at $23.31.

RM’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.

RM has an A grade for Value and a B for Stability, Momentum, and Quality. It is ranked #2 out of 47 stocks within the Consumer Financial Services industry.

Click here to access additional RM ratings for Growth and Sentiment.

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FCFS shares were trading at $114.50 per share on Tuesday afternoon, up $0.45 (+0.39%). Year-to-date, FCFS has gained 33.58%, versus a 20.61% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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