On Wednesday, BTIG maintained a Neutral stance on OneMain (NYSE:OMF) shares, after analyzing the company's August monthly data. The firm's assessment indicated that net losses were in line with their third-quarter estimate of 7.20%, mirroring first-quarter delinquency levels. Consequently, BTIG is confident in their third-quarter earnings per share (EPS) projection of $1.16 for OneMain.
The data revealed a slight increase in 30-89 day delinquencies for August, up by 10 basis points month-over-month, which is a slower rise compared to the 26 basis points increase in July. This marks a change from the previous trend of accelerating delinquencies over the last four months.
Delinquency levels have now returned to where they were in January 2024. Furthermore, losses in August rose by 12 basis points month-over-month, again showing a deceleration from the 28 basis points increase in July.
The recent trends lend credibility to CEO Doug Shulman's statement last month, suggesting that the financial situation of OneMain's near-prime consumer base is stabilizing. However, despite the slowdown in delinquency and loss increases, BTIG expressed a desire to see an improvement in absolute numbers, noting that the current loss levels are still significantly higher than OneMain's historical mid-to-high 6% range.
BTIG also pointed out that August's delinquency rates were the second-highest since 2016, following the acquisition of OneMain by Springleaf. The firm raised concerns about whether their 2025 loss rate forecast of 6.85%, which aligns with the company's guidance, might be overly optimistic. They suggested that if the loss trend persists, it could lead to stricter underwriting standards, potentially slowing growth and affecting credit trends.
OneMain's financials and future outlook will be further discussed during BTIG's Financials Conference, where OneMain's CFO Jenny Osterhout is scheduled to speak on Thursday, September 19. Interested parties have been invited to contact their BTIG representative to register for the event.
In terms of valuation, OneMain's shares are trading at 9.3 times BTIG's estimated 2024 EPS and 6.1 times their estimated 2025 EPS. BTIG remarked that this valuation appears rich compared to historical norms, suggesting a cautious perspective on the stock's current pricing.
In other recent news, OneMain Holdings (NYSE:OMF) has experienced significant developments. The company announced the unexpected resignation of Aneek S. Mamik from its Board of Directors, a significant change considering Mamik's role since the Consortium of Värde and Apollo Global Management (NYSE:APO) affiliates acquired a substantial share of the company's stock. The implications of this shift in board composition are yet to be seen.
On the financial front, OneMain Financial reported a positive Q2 2024, with a 7% year-over-year rise in total revenue to $1.4 billion. The company's tightened underwriting standards have resulted in improved credit metrics, and a surge in origination volumes is expected later in the year. OneMain Financial's credit card and auto finance sectors are anticipated to be significant contributors to future growth.
Furthermore, the company successfully secured $1.9 billion through debt issuances, emphasizing its commitment to a robust regular dividend. OneMain Financial anticipates its receivables to reach $24.5 billion by year's end, maintaining a conservative underwriting approach. Analyst Jenny Osterhout expressed confidence in decreasing losses for the rest of the year, indicating potential growth in the near future.
InvestingPro Insights
OneMain (NYSE:OMF) has shown a notable performance in the market with a significant return over the last week, reflecting a 10.55% price total return. This aligns with the InvestingPro Tip that highlights the stock's strong return over the last five years. Moreover, OneMain's commitment to shareholder value is evident in their substantial dividend yield of 8.57%, which has grown by 4.0% in the last twelve months as of Q2 2024.
With a market capitalization of $5.81 billion and a price-to-earnings (P/E) ratio of 9.95, OneMain's valuation metrics offer a snapshot of the company's financial health and market perception. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 9.77, suggesting that the stock is priced relatively modestly in relation to its earnings. The company's gross profit margin is impressive at 92.24%, indicating a strong ability to retain earnings after the cost of goods sold is accounted for.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available on OneMain, including insights on stock price volatility and profitability predictions for the year. To explore these further, visit the InvestingPro platform for OneMain at: https://www.investing.com/pro/OMF.
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