NAVI: Navient is a high value stock: should you buy?

The Navient Corporation Asset Management and Business Processing Service Provider Award (NAVI) has more than doubled since it hit its 52-week low at $ 5.92 in April 2020. The company has been affected by the pandemic due to student loan forbearance and a low rate environment. ‘low interest. However, the situation has improved and forbearance loans are gradually decreasing as the economy reopens.

The stock has rebounded 103.6% in the past nine months to close yesterday’s trading session at $ 14.31, after hitting its all-time high of $ 14.53. However, the title still seems undervalued at its current price point.

In terms of the forward non-GAAP price-to-earnings ratio, NAVI’s 4.49x value is 64.8% lower than the industry average of 12.76x. And in terms of futures price / sell ratio, the stock’s 2.36x is 28.3% lower than the industry average 3.29x.

Here are the factors that we believe could influence NAVI’s performance in the coming months:

Diversified portfolio

NAVI operates through four segments – Federal Family Education Loans Program (FFELP) loans, private education loans, business services and others. Its FFELP segment has been affected by the pandemic as several student loans have been granted forbearance status. President Joe Biden too canceled $ 2.3 billion in student loans for more than 110,000 student borrowers. But he focused on the cancellation of federal student loans, not private loans. Thus, over the long term, NAVI should see an improvement in its FFELP segment as lending conditions improve.

In addition, the company provides additional business processing services to a range of clients, including federal agencies, state and local governments, health systems and other health care providers and municipalities.

Improve finances

NAVI’s net interest income in the federal student loans business increased 9.5% year over year to $ 162 million for the fourth quarter ended Dec. 31. Its net income in the consumer lending sector also increased 21.3% year over year to $ 108 million. Its Business Processing revenues increased 57.6% year over year to $ 93 million. And the company’s adjusted EPS was $ 0.97 for the quarter, up 44.8% year-over-year. In fact, NAVI has exceeded a consensus EPS estimate in three of the past four quarters.

Favorable sentiment among analysts

NAVI has an average brokerage rating of 1.5. Additionally, out of 10 Wall Street analysts who rated the stock, four rated it Strong Buy and two rated it Buy.

POWR ratings reflect favorable outlook

NAVI has an overall B rating, which is equivalent to buying from our POWR odds system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.

Our proprietary scoring system also rates each stock against eight different categories. The valuation ratios below those of the industry resulted in it obtaining a B rating for Value.

It also has a B rating for Momentum. This is in line with its gains of 45.7% over the past three months and its returns of 15.6% over the past month.

Click on here to see additional POWR ratings for NAVI (Growth, Stability, Sentiment and Quality).

NAVI is ranked n ° 10 out of 104 stocks in the D ranking Financial services (business) industry.

If you are looking for other top rated stocks in the financial services (business) industry, with an overall POWR rating of A or B, you can go there. here.

At the end of the line

As lending conditions continue to improve, NAVI is expected to thrive this year and beyond. It is also expected to gain by leveraging its diverse portfolio of products and services. In fact, its EPS is expected to grow at a rate of 7.4% per year over the next five years. Given this favorable outlook, NAVI is trading at a considerable discount to its peers. We therefore believe that value investors should not fail to bet on it now.

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Shares of NAVI were trading at $ 14.37 per share on Thursday morning, up $ 0.06 (+ 0.42%). Year-to-date, NAVI has gained 48.20%, compared to a 7.13% increase in the benchmark S&P 500 over the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in economics in college and has a passion for writing, which led to his career as a research analyst. After…

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