Today, the sector with the most stocks on the Zacks Rank is the Financial Sector. It has 44 stocks on the list, with the second most numerous being the Computer Sector with 36.
Financial Sector Outperformance
The financial sector has quietly been one of the top performing in the market, bested only by the communications sector over the last year.
The financial sector offers a very diverse array of different companies – here I will share three that are not well known by most of the investing public. Virtu Financial VIRT, StepStone Group STEP, and Palomar Holdings PLMR all enjoy high growth projections, robust business models and top Zacks Ranks.
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Virtu Financial: Cash Flowing Market Maker
Virtu Financial is a leadingglobal marketmaker and financial technology firm. Established in 2008, Virtu provides liquidity and competitive pricing across numerous asset classes, including equities, fixed income, currencies and commodities.
The company utilizes advanced technology to offer efficient trading solutions, emphasizing low latency and high-speed execution. Virtu’s business model is based on leveraging its sophisticated infrastructure to facilitate trades for institutional clients, retail brokers, and other market participants, ensuring liquidity and tighter spreads. Additionally, Virtu offers a range of analytics and execution services to optimize trading strategies and enhance market transparency.
Analysts have bumped up earnings estimates over the last two months, giving Virtu a Zacks Ranks #1 (Strong Buy) rating. FY24 and FY25 have seen unanimous upgrades and are forecast to grow 27% and 13% YoY respectively.
Image Source: Zacks Investment Research
Another very appealing characteristic of Virtu Financial is its hefty dividend yield. Because the company is so good at what they do, they produce considerable and consistent cash flows. Because of this, shareholders enjoy a 4.2% dividend.
Virtu also trades at a very reasonable valuation. Today it is trading at a one year forward earnings multiple of 11.3x, which is right in line with its 10-year median.
However, with 3–5-year EPS growth forecasts of 22.3% annually, VIRT has a PEG ratio of just 0.5. Based on the metric, which considers growth rates, this is a deep discount.
Image Source: Zacks Investment Research
Palomar Holdings: Huge Sales Growth Forecasts
Palomar Holdings is a specialty property insurance company focused on providing tailored insurance solutions for individuals and businesses. Founded in 2014 and headquartered in La Jolla, California, Palomar specializes in offering coverage for earthquake, wind and flood risks, primarily in catastrophe-exposed regions.
The company leverages its deep expertise in risk assessment and underwriting to create customized policies that address the unique needs of its clients. Palomar’s strategic approach includes a combination of advanced analytics and reinsurance partnerships to manage risk effectively.
Reflecting upward trending earnings revisions, Palomar Holdings enjoys a Zacks Rank #1 (Strong Buy) rating. Earnings estimates have risen across timeframes, with FY24 estimates increasing 8% in the last two months.
Sales are projected to climb aggressively in the coming years as well. In this year, analysts are anticipating YoY sales growth of 32% and 22.8% next year.
Image Source: Zacks Investment Research
Today, Palomar Holdiongs is trading at a one year forward earnings multiple of 20.9x. This is below both the industry average and its five-year median of 24.1x and seems a very reasonable valuation for a company growing sales at such a rate.
Image Source: Zacks Investment Research
StepStone Group: Leader in Private Market Investments
StepStone Group is a global private markets investment firm specializing in providing customized investment solutions and advisory services. Established in 2007 and headquartered in New York City, StepStone serves a diverse client base, including public and private pension funds, sovereign wealth funds, insurance companies and endowments. The firm’s expertise spans a wide array of asset classes, including private equity, private debt, real estate, and infrastructure.
With the explosion in popularity of private market investments, and the general trend of many leading companies forgoing an IPO, StepStone Group has been extremely well positioned. Today, the company is managing $156 billion in assets, and has grown the AUM 21% annually over the last five years.
Like the other two companies, StepStone Group boasts a Zacks Rank #1 (Strong Buy) rating. Earnings estimates have been unanimously upgraded and across timeframes.
The company is anticipating strong growth in both sales and earnings as well. Current year sales are expected to climb 18.4% YoY and EPS by 40.5%, while next year’s sales are expected to grow 17.2% YoY and EPS by 22%.
Image Source: Zacks Investment Research
Market and Sector Beating Returns
Each of these companies has also put up strong one-year performances, beating both the market and financial sector over the last year. Relative strength like this indicates that momentum is strong in these names.
We can se StepStone group is up a whopping 112% in the last twelve months alone.
Image Source: TradingView
Bottom Line
For investors seeking more exposure to the financial sector, while increasing diversification and picking up some unique companies, StepStone Group, Virtu Financial, and Palomar Holdings are all worthwhile considerations.
Research Chief Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report
Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
StepStone Group Inc. (STEP) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
