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Regional Management Stock Rises 16% in a Month: Should You Buy?
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Regional Management Corp. (RM - Free Report) shares have jumped 15.9% in the past month, outperforming the industry’s return of 11% and the S&P 500 Index’s rise of 8.7%. Improving credit performance and growth in small loan portfolios appear to have catalyzed this bullishness.
Currently priced at $33.53, the stock is just 1.8% below its 52-week high of $34.15. This proximity underscores investor confidence and market optimism about this consumer finance company’s prospects. It has the ingredients for further price appreciation. Technical indicators for Regional Management show that the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.
RM’s One-Month Price Performance
Image Source: Zacks Investment Research
Is this the right time to buy RM shares for potential upside? Let’s take a look at the stock’s growth drivers.
RM’s Growth Drivers
Despite the impacts of inflation on credit performance, the company managed to score improvement in performance in the first half of 2024, which contributed to its interest and fee yield growth. It recorded a net credit loss rate of 12.7% in the second quarter and expects it to average at around 11.1-11.2% for the full year 2024.
RM expects to witness 60-70 basis points year-over-year growth in total revenue yield in 2024. A higher pricing environment will likely support its growth. Moreover, the company is seeing growth in its higher-margin small loan portfolio, which will boost its interest and fee yield.
The company continues to invest in its strategic and growth initiatives while keeping a tight grip on general and administrative expenses, benefiting the expense ratio and boosting profits. This has resulted in earnings estimate revisions for the company. RM expects its net income to reach $41-$44 million in 2024.
Estimate Revisions for RM Stock
Reflecting the positive sentiment around Regional Management, the Zacks Consensus Estimate for earnings per share has seen upward revisions. The consensus estimate for 2024 adjusted earnings for RM is currently pegged at $4.42 per share, which indicates a 47.3% year-over-year surge. The consensus mark for 2025 suggests a further 36.2% jump.
Image Source: Zacks Investment Research
The company beat earnings estimates in each of the past four quarters, with an average surprise of 45.5%. The consensus estimate for 2024 and 2025 revenues suggests 6% and 5.6% year-over-year growth, respectively.
Key Concerns for RM
There are a few factors that investors should keep an eye on.
Regional Management's cash balance of $4.3 million at the second quarter-end was much lower than the net debt of $1.37 billion. Its long-term debt-to-capitalization of 79.9% is much higher than the industry average of 53.8%.
Growing competition in the consumer finance space and low growth in disposable income due to the economic environment affecting payments can be headwinds for the company.
Final Verdict: Hold RM Stock for Now
Regional Management appears to have significant growth potential with improving credit performance, expanding higher-margin small loan business and cost optimization. Current shareholders may consider holding on to their shares, as earnings estimate revisions are indicating more profits on the way. However, potential investors might want to keep an eye on its balance sheet and developments in the overall consumer finance space and wait for a better entry point.
RM stock currently carries a Zacks Rank #3 (Hold).
Key Picks
Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 67.6% year-over-year growth. During the past month, WT has witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 63.6% year-over-year improvement. During the past month, HIVE has witnessed two upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues is pegged at $125.2 million, indicating a 9.4% increase from a year ago.
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Regional Management Stock Rises 16% in a Month: Should You Buy?
Regional Management Corp. (RM - Free Report) shares have jumped 15.9% in the past month, outperforming the industry’s return of 11% and the S&P 500 Index’s rise of 8.7%. Improving credit performance and growth in small loan portfolios appear to have catalyzed this bullishness.
Currently priced at $33.53, the stock is just 1.8% below its 52-week high of $34.15. This proximity underscores investor confidence and market optimism about this consumer finance company’s prospects. It has the ingredients for further price appreciation. Technical indicators for Regional Management show that the stock is trading above its 50-day and 200-day moving averages, signaling strong upward momentum.
RM’s One-Month Price Performance
Is this the right time to buy RM shares for potential upside? Let’s take a look at the stock’s growth drivers.
RM’s Growth Drivers
Despite the impacts of inflation on credit performance, the company managed to score improvement in performance in the first half of 2024, which contributed to its interest and fee yield growth. It recorded a net credit loss rate of 12.7% in the second quarter and expects it to average at around 11.1-11.2% for the full year 2024.
RM expects to witness 60-70 basis points year-over-year growth in total revenue yield in 2024. A higher pricing environment will likely support its growth. Moreover, the company is seeing growth in its higher-margin small loan portfolio, which will boost its interest and fee yield.
The company continues to invest in its strategic and growth initiatives while keeping a tight grip on general and administrative expenses, benefiting the expense ratio and boosting profits. This has resulted in earnings estimate revisions for the company. RM expects its net income to reach $41-$44 million in 2024.
Estimate Revisions for RM Stock
Reflecting the positive sentiment around Regional Management, the Zacks Consensus Estimate for earnings per share has seen upward revisions. The consensus estimate for 2024 adjusted earnings for RM is currently pegged at $4.42 per share, which indicates a 47.3% year-over-year surge. The consensus mark for 2025 suggests a further 36.2% jump.
The company beat earnings estimates in each of the past four quarters, with an average surprise of 45.5%. The consensus estimate for 2024 and 2025 revenues suggests 6% and 5.6% year-over-year growth, respectively.
Key Concerns for RM
There are a few factors that investors should keep an eye on.
Regional Management's cash balance of $4.3 million at the second quarter-end was much lower than the net debt of $1.37 billion. Its long-term debt-to-capitalization of 79.9% is much higher than the industry average of 53.8%.
Growing competition in the consumer finance space and low growth in disposable income due to the economic environment affecting payments can be headwinds for the company.
Final Verdict: Hold RM Stock for Now
Regional Management appears to have significant growth potential with improving credit performance, expanding higher-margin small loan business and cost optimization. Current shareholders may consider holding on to their shares, as earnings estimate revisions are indicating more profits on the way. However, potential investors might want to keep an eye on its balance sheet and developments in the overall consumer finance space and wait for a better entry point.
RM stock currently carries a Zacks Rank #3 (Hold).
Key Picks
Investors interested in the broader Finance space may look at some better-ranked players like Jackson Financial Inc. (JXN - Free Report) , WisdomTree, Inc. (WT - Free Report) and HIVE Digital Technologies Ltd. (HIVE - Free Report) . While Jackson Financial currently sports a Zacks Rank #1 (Strong Buy), WisdomTree and HIVE Digital carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 30 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for WisdomTree’s 2024 earnings indicates 67.6% year-over-year growth. During the past month, WT has witnessed two upward estimate revisions against none in the opposite direction. It beat earnings estimates twice in the past four quarters and met on the other occasions, with an average surprise of 5.9%.
The Zacks Consensus Estimate for HIVE Digital’s current-year earnings suggests a 63.6% year-over-year improvement. During the past month, HIVE has witnessed two upward estimate revisions against none in the opposite direction. The consensus mark for current-year revenues is pegged at $125.2 million, indicating a 9.4% increase from a year ago.