There is an expectation that the global financial markets will take a hit in the coming quarters amid the coronavirus pandemic. With various sectors of the economy experiencing a squeeze due to the impact of the measures taken to combat Covid-19, very few areas offer compelling investment opportunities.
The financial sector is one of the remaining sectors that long-term investors can look to invest in amid an increase in government spending and favorable lending rates. Still, investors will need to dig deeper to find opportunities that could pay off amid the crisis. These three financial stocks provide both attractive valuation multiples and exciting growth prospects.
Pinnacle Financial Partners
Pinnacle Financial Partners Inc. (PNFP, Financial) has plunged nearly 34% since Feb. 20 amid the coronavirus pandemic. This decline now values the company’s stock at a compelling price-earnings ratio of 9.58. With the government taking measures to limit the impact of the lockdown and social distancing, financial services stocks could witness a significant recovery in the coming months.
Pinnacle Financial Partners has already demonstrated this after bouncing off five-year lows of about $27.80 reached on March 23 to surge to the current level of $41.79, which reflects a gain of more than 32%. Looking at the company’s earnings growth prospects for the next five years, it looks like there is more to come from this Nashville, Tennessee-based regional bank.
The company’s earnings per share are expected to grow at an annual rate of about 32% for the next five years, which results in a price-earnings to growth ratio (five years expected) of 0.29.
TCF Financial Corp. (TCF, Financial) is next. Its stock is up nearly 60% since March 18. This gain comes at the back of a major collapse that saw the company lose more than 30% of its market value starting Feb. 20 through mid-March.
TCF Financial is also one of the best dividend-paying stocks with a yield of 4.90% and a payout of less than 50%. This provides more room for continued dividend growth in the coming years. The company’s earnings are expected to grow at an average annual rate of about 34% for the next five years, which effectively values the stock at a PEG ratio of 0.48.
In the most recent quarter, TCF Financial’s earnings fell 26% on a year-over-year basis while the top line grew 29%. More twists and turns are expected in the short term, but in the long term, it looks promising.
Just like its peers, Voya Financial Inc. (VOYA, Financial) has experienced a turbulent period over the last four months. The company’s stock plunged more than 50% between Feb. 20 and March 23. It has since gained more than 52%. Voya currently trades at a trailing 12-month price-earnings ratio of 10.51.
Its earnings are expected to grow at an average annual rate of 25.60% for the next five years, which will value its shares at a PEG ratio of about 0.44. This New York-based insurance and retirement investment company experienced a slight decline in the top line in the most recent quarter, but with the economic stimulus package set to take effect, things are looking bright going forward.
Disclosure: No positions in the stocks mentioned.
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