Technological advancements and changing customer demands are propelling the financial services industry's growth. To capitalize on this trajectory, it could be wise to invest in robust finance stocks H&R Block, Inc. (HRB), FirstCash Holdings, Inc. (FCFS), and Donnelley Financial Solutions, Inc. (DFIN) for solid gains this year.
Let us understand this in more detail.
The financial services sector is expected to undergo a pivotal transformation this year, driven by technological advancements and shifting customer demands. Anticipated as a watershed moment, the finance landscape is poised for profound changes and remarkable advancements, heralding a dynamic and groundbreaking year in the industry.
AI's impact is expected to extend across sectors by revolutionizing customer service, reshaping financial management tools, and streamlining back-office operations. When skillfully leveraged, these advancements offer efficient, innovative, and cost-effective solutions, ushering in a new era in finance.
Digital currencies and cryptocurrencies are also expected to resurge this year. With over 130 countries exploring Central Bank Digital Currencies (CBDCs) and Bitcoin's rebound from the 2021 downturn, there's a renewed focus among innovators and investors, signaling robust interest in these evolving financial instruments.
Furthermore, emerging technologies such as VR are introducing immersive interaction methods. As customer experience becomes pivotal in purchase decisions, the link between customer loyalty and business success prompts a deeper focus on leveraging these advancements, with more finance enterprises prioritizing this strategy in 2024.
Brainy Insights forecasts the fintech technologies market to reach $1.25 trillion by 2032. Fintech encompasses technologies empowering consumers to manage, spend, and invest money. Concurrently, Mordor Intelligence projects the financial services application market to be $146.65 billion in 2024 and grow at a CAGR of 13.1%, reaching $271.75 billion by 2029.
Considering this encouraging outlook, let’s look at the fundamentals of the three financial stocks.
H&R Block, Inc. (HRB)
HRB offers assisted and do-it-yourself (DIY) income tax return preparation services and products to the general public. Moreover, it provides small business financial solutions through its company-owned or franchise offices and online platforms.
On December 14, 2023, HRB unveiled the H&R Block AI Tax Assist, a revolutionary generative AI tool enhancing tax preparation. The innovation aligns with the company’s renowned tax acumen, empowering individuals and small businesses to manage taxes independently and confidently.
The strategic move is poised to elevate HRB's prospects by attracting a broader customer base seeking reliable, efficient, and expert-driven tax solutions, ultimately driving growth and securing a competitive edge in the tax preparation industry.
On November 8, 2023, HRB unveiled the enhanced H&R Block Emerald Advance® Loan. The revamped loan, devoid of annual fees, disburses up to $1,300 instantly upon application, amplifying customer satisfaction. This approach could fortify HRB's market position and attract a wider clientele.
For the fiscal 2024 first quarter that ended September 2023, HRB’s revenues from total U.S. tax preparation and related services increased 4.7% year-over-year to $90.36 million, while its total revenues grew 2.1% from the year-ago value to $183.80 million. In addition, the company’s cash, cash equivalents, and restricted cash at the end of the period stood at $457.56 million, up 6.1% from the previous year’s period.
Analysts expect HRB’s revenue to increase 2.3% year-over-year to $3.55 billion for the fiscal year ending June 2024. The company’s EPS for the ongoing year is estimated to rise 10.9% from the prior year to $4.24. Also, the company surpassed the consensus revenue and EPS estimates in three of four trailing quarters.
Shares of HRB have gained 45.6% over the past six months to close the last trading session at $46.69.
HRB’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
HRB has an A grade for Quality and a B for Value. It is ranked #14 out of 48 stocks within the Consumer Financial Services industry.
In addition to the POWR Ratings I’ve highlighted, you can see HRB’s Growth, Momentum, Stability, and Sentiment ratings here.
FirstCash Holdings, Inc. (FCFS)
FCFS operates retail pawn stores, extending loans secured by pledged personal property like jewelry, electronics, tools, and more. The company also sells merchandise obtained through forfeited pawn loans and directly from customers, offering a diverse range of items through its retail outlets.
In its fiscal third-quarter release for 2023, FCFS announced the addition of 104 pawn stores, including 79 acquired U.S. locations and 25 de novo stores, predominantly in Latin America. The company is poised to surpass 150 new pawn stores for the full year, anticipating substantial revenue and earnings growth in the fourth quarter and beyond.
For the fiscal 2023 third quarter that ended September 30, 2023, FCFS’ adjusted revenue increased 15.8% year-over-year to $786.30 million. Its adjusted EBITDA rose 22.2% from the year-ago value to $132.99 million. Additionally, adjusted net income and adjusted EPS grew 15.9% and 20% from the prior year’s period to $70.78 million and $1.56, respectively.
Analysts expect FCFS’ revenue to increase 15.7% year-over-year to $3.16 billion for the fiscal year that ended December 2023. The company’s EPS for the same period is expected to come in at $5.81, up 12% from the previous year. Moreover, the company topped the consensus revenue estimates in all four trailing quarters.
The stock has gained 15.4% over the past six months, closing the last trading session at $108.82.
FCFS’ robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
FCFS has a B grade for Momentum, Stability, and Sentiment. It is ranked #8 out of 48 stocks within the Consumer Financial Services industry.
Click here to access additional FCFS ratings for Growth, Value, and Quality.
Donnelley Financial Solutions, Inc. (DFIN)
DFIN is a risk and compliance solutions firm. Its segments include Capital Markets - Software Solutions (CM-SS); Capital Markets - Compliance and Communications Management (CM-CCM); Investment Companies - Software Solutions (IC-SS); and Investment Companies - Compliance and Communications Management (IC-CCM).
In its fiscal 2023 third-quarter release, DFIN announced the initiation of its Tailored Shareholder Reports' SaaS product, furnishing investment company clients with a comprehensive financial reporting solution.
The synergy of its compliance software platform and profound domain service expertise positions DFIN favorably to seize recurring revenue opportunities arising from both existing and prospective regulations.
During the fiscal 2023 third quarter that ended September 30, 2023, DFIN’s non-GAAP gross profit grew 4.1% year-over-year to $109.10 million. Its non-GAAP income from operations rose 4.2% from the year-ago value to $35 million. As of September 30, 2023, DFIN’s total assets came in at $839.30 million, up from $828.30 million as of December 31, 2022.
The consensus revenue estimate of $826.55 million for the fiscal year ending December 2024 reflects a 4.6% year-over-year improvement. Similarly, the consensus EPS estimate of $3.55 for the current year exhibits a 9.7% rise from the prior year. Furthermore, DFIN surpassed the consensus EPS estimates in three of the four trailing quarters.
Shares of DFIN have gained 28.6% over the past six months, closing the last trading session at $60.60.
DFIN’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
DFIN has an A grade for Sentiment and a B for Value. It has ranked #6 in the 102-stock Financial Services (Enterprise) industry.
Click here to access the additional DFIN ratings (Growth, Momentum, Stability, and Quality).
What To Do Next?
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HRB shares were unchanged in premarket trading Friday. Year-to-date, HRB has declined -3.47%, versus a 0.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
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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