OneMain Holdings, Inc. (OMF) in Evansville, Ind., is one of the largest personal installment loan companies, with roughly 2.2 million customers and 1,400 branches. On August 11, 2021, it priced an offering of 7 million shares of stock. The stock has gained 55.7% in price over the past year and 3.4% over the past six months to close the last trading session at $56.68.

OMF's revenue and EPS have grown at CAGRs of 15.9% and 79.6%, respectively, over the past three years. Also, the company has increased its dividends consecutively for the past two years, paying its latest dividend of $4.20 per share on August 13, which translated to a dividend yield of 4.94%.

Furthermore, half of the Federal Reserve policymakers now expect to start raising interest rates next year, which should benefit the company. So, OMF’s near-term prospects look promising.

Here’s what could shape OMF’s performance in the near term:

Widening Digital Product and Services Portfolio

OMF acquired customer-focused financial wellness fintech company Trim in April 2021. The acquisition is expected to enhance its digital products and services. Its digital tools are expected to help customers shrink their bills, automate savings, and cancel subscriptions. The company announced in May 2021 that it would be rolling out a credit card later this year.

Impressive Financials

For the second quarter, ended June 30, 2021, OMF’s net interest income after provision for finance receivable losses was $708 million, representing an 84.9% year-over-year rise. The company’s other revenues came in at $150 million, versus $148 million in the year-ago period. Its net income increased 293.3% year-over-year to $350 million. Also, its EPS totaled $2.60, up 293.9% year-over-year.

Favorable Analyst Estimates

Analysts expect OMF’s revenue to increase 5.6% this year and 10.2% next year. The company’s EPS is expected to increase 75.3% year-over-year to $$10.64 in its fiscal year 2021. Wall Street analysts expect the stock to hit $72.27 in the near term, which indicates a potential 27.5% upside. Also, all 11 analysts that have rated the stock rated a Buy.

Discounted Valuation

In terms of forward non-GAAP P/E, OMF’s 5.34x is 53.2% lower than the 11.42x industry average. The stock’s 0.23x forward non-GAAP PEG is 77.2% lower than the 1.02x industry average. Moreover, its forward P/S and P/CF of 1.86x and 3.92x, respectively, are lower than 3.38x and 10.55x industry averages.

POWR Ratings Reflect Rosy Prospects

OMF has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. OMF has a B grade for Momentum, which is consistent with its 13.9% gains over the past nine months and 17.7% year-to-date returns.

The stock has a B grade for Quality, which is in sync with its 95.14% trailing-12-month gross profit margin, which is 49.3% higher than the 63.72% industry average. Moreover, OMF has a B grade for Value, which is consistent with its lower-than-industry valuation ratios.

In addition to the POWR Rating grades I’ve just highlighted, we’ve also rated OMF for Growth, Stability, and Sentiment. Get all the OMF ratings here.

OMF is ranked #2 of 52 stocks in the Consumer Financial Services industry.

Bottom Line

OMF reported impressive second-quarter earnings results on July 21. Consequently, its shares soared to hit their 52-week price high of $63.19 on July 22. It is currently trading 10.3% below its 52-week high but has immense upside potential. So, we think it could be wise to scoop up its shares now.

How Does OneMain Holdings (OMF) Stack Up Against its Peers?

While OMF has an overall POWR Rating of A, one could also consider looking at its industry peer, Regional Management Corp. (RM), which has an A (Strong Buy) rating as well.

OMF shares were unchanged in premarket trading Tuesday. Year-to-date, OMF has gained 38.10%, versus a 17.59% rise in the benchmark S&P 500 index during the same period.

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 has led to her career as a research analyst.

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