On the whole, the financial sector has not been the most reliable of choices for investors. But when each financial company is considered on an individual basis, there certainly are some that are worthy of further investigation. We ran a scan to find those that are producing solid profits while not relying heavily on debt. These two qualities generally point to experienced management that understands the necessity of tight fiscal controls. Take a look at the list of financial stocks below to begin your own analysis.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
We first looked for financial stocks. Next, we then screened for businesses that have maintained a sound capital structure (D/E Ratio<.1). We then screened for businesses that have strong profitability relative to their asset base (ROA [TTM]>10%) (Net Margin [TTM] >10%). We did not screen out any market caps.
Do you think these stocks should be priced higher? Use our screened list as a starting point for your own analysis.
1) Fort Dearborn Income Securities, Inc.(FDI)
| Sector | Financial |
| Industry | Closed-End Fund - Debt |
| Market Cap | $149.87M |
| Beta | 0.15 |
Key Metrics
| Debt/Equity Ratio | 0.00 |
| Return on Assets | 12.89% |
| Net Margin | 261.27% |
| Short Interest | 0.04% |
Fort Dearborn Income Securities, Inc. is a closed-end fixed income mutual fund launched and managed by UBS Global Asset Management (Americas), Inc. It invests in the fixed income markets. The Fund invests primarily in investment grade long-term fixed income debt securities. Its investment portfolio comprises various industries, such as aerospace and defense, automobiles, beverages, capital markets, chemicals, commercial banks, commercial services and supplies, communications equipment, consumer finance, diversified financial services, telecommunication services, electric utilities, food and staples retailing, food products, gas utilities, household durables, insurance machinery, media, metals and mining, multi-utilities, multiline retail, oil and gas, paper and forest products, personal products, pharmaceuticals, real estate, road and rail, thrifts and mortgage finance, tobacco, and wireless telecommunication services. Fort Dearborn Income Securities, Inc. was formed in 1972 and is domiciled in United States.
2) Nuveen New York Municipal Value Fund, Inc. (NNY)
| Sector | Financial |
| Industry | Closed-End Fund - Debt |
| Market Cap | $157.01M |
| Beta | 0.11 |
Key Metrics
| Debt/Equity Ratio | 0.02 |
| Return on Assets | 10.78% |
| Net Margin | 220.93% |
| Short Interest | 0.09% |
Nuveen New York Municipal Value Fund, Inc. is a closed-end fixed income mutual fund launched by Nuveen Investments, Inc. The fund is managed by Nuveen Asset Management. It invests in the fixed income markets of New York. The fund invests in tax exempt municipal bonds, with a rating of Baa or higher. It employs fundamental analysis, with a bottom-up stock picking approach, to create its portfolio. The fund benchmarks the performance of its portfolio against the Standard & Poor's New York Municipal Bond Index and Standard & Poor's National Municipal Bond Index. Nuveen New York Municipal Value Fund, Inc. was formed on October 7, 1987 and is domiciled in the United States.
3) Eaton Vance Municipal Income Trust (EVN)
| Sector | Financial |
| Industry | Closed-End Fund - Debt |
| Market Cap | $325.90M |
| Beta | 0.25 |
Key Metrics
| Debt/Equity Ratio | 0.00 |
| Return on Assets | 11.93% |
| Net Margin | 225.13% |
| Short Interest | 0.45% |
Eaton Vance Municipal Income Trust is a closed-end fixed income mutual fund launched and managed by Eaton Vance Municipal Income Trust. It invests in the fixed income markets. The fund invests primarily in investment grade municipal obligations of various sectors, such as cogeneration, education, electric utilities, general obligations, healthcare, hospital, housing, transportation, and nursing home. Eaton Vance Municipal Income Trust was formed in 1998 and is domiciled in United States.
4) First Marblehead Corp. (FMD)
| Sector | Financial |
| Industry | Credit Services |
| Market Cap | $118.32M |
| Beta | 1.92 |
Key Metrics
| Debt/Equity Ratio | 0.00 |
| Return on Assets | 24.93% |
| Net Margin | 462.05% |
| Short Interest | 4.42% |
The First Marblehead Corporation, together with its subsidiaries, provides outsourcing services for designing and implementing private education loan programs to national and regional financial institutions, and educational institutions in the United States. It offers a Monogram loan product service platform that provides an integrated suite of services, including program design, marketing support, loan origination, portfolio management services, and loan securitization services.
The company primarily focuses on private education loan programs for K-12, undergraduate, and graduate students. Its services enable lenders to offer consumer education loans with terms and pricing alternatives, as well as product options to qualified applicants based on their credit profiles; and customize various loan terms, such as repayment options, repayment terms, and borrower pricing. The company also provides outsourced tuition planning, tuition billing, and payment technology services for universities, colleges, and secondary schools to collect and process the tuition payments and data. In addition, it offers residential and commercial mortgage loans; retail savings; and money market and time deposit products. The First Marblehead Corporation was founded in 1991 and its headquarters is in Boston, Massachusetts, with additional offices in Medford, Massachusetts; and North Providence and Warwick, Rhode Island.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/03/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
