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Category: Stock Market and OneMain Holdings
Date: 11 February 2020 Stock Price: $44.98 We take a look at the 4th quarter earnings report of their 2019 fiscal year of OneMain Holdings, a supplier of lending solutions to everyday Americans. 88% of Americans are within driving distance from a OneMain branch, and the group has served over 14 millions clients since 2006.
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About OneMain Holdings
OneMain Holdings is a supplier of lending solutions (loans) to everyday Americans. The group has over 1500 branches across the United States and over 9500 employees. OneMain has served over 14 million clients since 2006 and 88% Americans live within driving distance (25 miles) of a OneMain Branch and the group currently has 2.4 million current customers. Around 50% of OneMain clients do business with the group at least twice.
Overview of OneMain's 4th quarter 2019 earnings report
The data below refers to the latest quarter's data (unless specified otherwise)
- Total interest income: $1.107 billion (up from $1.065 billion for the same quarter of the previous year)
- Total interest income increased by 3.94% over the last 12 months
- Net interest income after provision for finance receivables losses: $562 million (up from $539 million for the same quarter of the previous year)
- Total other expenses: $380 million (down from $398 million for the same quarter of the previous year)
- Total other expenses decreased by -4.52% over the last 12 months
- Net income: $261 million (up from $248 million for the same quarter of the previous year)
- Diluted earnings per share: $1.91 (up from $1.82 for the same quarter of the previous year)
- PE ratio of OneMain Holdings: 7.17
- Number of shares in issue: 136.5 million (up from 136.4 million for the same period of the previous year)
- Cash and cash equivalents: $1.227 billion
- Cash and cash equivalents per share: $8.98
- Cash and cash equivalents makes up 19.96% of OneMain's market capital
- Cash and cash equivalents makes up 5.37% of OneMain's total assets
- Net finance receivable: $18.389 billion
- Accounts receivable makes up 80.6% of OneMain's total assets
- Goodwill in OneMain Holdings: $1.422 billion
- Goodwill per share: $10.41
- Goodwill makes up 6.23% of OneMain's total assets
- Stockholders equity in OneMain: $4.330 billion
- Stockholders equity per share: $31.72
- So OneMain's is trading at 1.42 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
OneMain Holdings (NYSE: OMF) management commentary on 4th quarter 2019 earnings
EVANSVILLE, Ind.--(BUSINESS WIRE)-- OneMain Holdings, Inc. (NYSE: OMF) today reported pretax income of $344 million and net income of $261 million for the fourth quarter of 2019, compared to $214 million and $168 million, respectively, in the prior year quarter. Earnings per diluted share were $1.91 in the fourth quarter of 2019, compared to $1.24 in the prior year quarter.
"We generated strong earnings growth and significant capital in the fourth quarter of 2019," said Doug Shulman, President and CEO of OneMain. "Credit remained stable, receivables growth was disciplined, and we continued to achieve operating leverage while investing in our business. Our ongoing initiatives to enhance our customer experience and optimize the profitability of our business contributed to this performance and will continue to benefit all aspects of our business, leading to greater shareholder value and capital generation over the long-term.
"We generated strong earnings growth and significant capital in the fourth quarter of 2019," said Doug Shulman, President and CEO of OneMain. "Credit remained stable, receivables growth was disciplined, and we continued to achieve operating leverage while investing in our business. Our ongoing initiatives to enhance our customer experience and optimize the profitability of our business contributed to this performance and will continue to benefit all aspects of our business, leading to greater shareholder value and capital generation over the long-term.
As of December 31, 2019, the company had principal debt balances outstanding of $17.5 billion, 44% of which was secured and 56% of which was unsecured. The company had $1.2 billion of cash and cash equivalents, which included $182 million of cash and cash equivalents held at our regulated insurance subsidiaries or for other operating activities that are unavailable for general corporate purposes. The company had $7.1 billion of undrawn revolving conduit facilities and $9.9 billion of unencumbered personal loans.
OneMain Holdings (NYSE: OMF) stock price history
The image below obtained from Google, shows the stock price history of OneMain over the last 5 years. And its been an ok time for OneMain stockholders. 5 years ago the stock of OneMain was trading at around $34 a stock and its currently trading at $44.98 a stock. That's a return of 32.3% provided to OneMain stockholders over the last 5 years.
The stock of OneMain is trading at very close to its 52 week high of $45.02 and it is far away from its 52 week low of $29.46 a stock, which to us is an indication that the short term sentiment and momentum of OneMain stock is very positive at this point in time.
The stock of OneMain is trading at very close to its 52 week high of $45.02 and it is far away from its 52 week low of $29.46 a stock, which to us is an indication that the short term sentiment and momentum of OneMain stock is very positive at this point in time.
Recent coverage of OneMain Holdings
The extract below discusses the latest regarding OneMain as obtained from TheStreet.com
OneMain Holdings (OMF) , the company formed from the pre-crisis lending businesses of Citigroup(C) and American International Group(AIG) , urged its shareholders Monday to reject a lowball takeover offer from a smaller, unprofitable competitor. The Evansville, Ind.-based lender, formerly known as Springleaf Holdings Inc., said that the unsolicited $1.5 billion stock-swap proposal from IEG Holdings Corp. is "grossly inadequate and reckless." The bid of two IEG shares for each of OneMain's 135,187,741 shares represents a 53% discount to the target's current price.
"Our board was unified in its determination that this offer is an opportunistic lowball offer that does not even remotely begin to value the company appropriately," OneMain CEO Jay Levine said in a statement. "We urge our stockholders to simply ignore this distracting and egregious offer entirely." There's no strategic rationale for the merger, according to OneMain's board, which questioned the value of the would-be suitor's stock. IEG has a market capitalization of $52 million and noted in its most recent quarterly regulatory filing that it has struggled to generate "positive net cash flows from operations."
Read the full article here
OneMain Holdings (OMF) , the company formed from the pre-crisis lending businesses of Citigroup(C) and American International Group(AIG) , urged its shareholders Monday to reject a lowball takeover offer from a smaller, unprofitable competitor. The Evansville, Ind.-based lender, formerly known as Springleaf Holdings Inc., said that the unsolicited $1.5 billion stock-swap proposal from IEG Holdings Corp. is "grossly inadequate and reckless." The bid of two IEG shares for each of OneMain's 135,187,741 shares represents a 53% discount to the target's current price.
"Our board was unified in its determination that this offer is an opportunistic lowball offer that does not even remotely begin to value the company appropriately," OneMain CEO Jay Levine said in a statement. "We urge our stockholders to simply ignore this distracting and egregious offer entirely." There's no strategic rationale for the merger, according to OneMain's board, which questioned the value of the would-be suitor's stock. IEG has a market capitalization of $52 million and noted in its most recent quarterly regulatory filing that it has struggled to generate "positive net cash flows from operations."
Read the full article here
OneMain Holdings (NYSE:OMF) stock valuation
So what do we value OneMain stock at after the release of their 4th quarter 2019 earnings a? Based on OneMain Holdings our valuation models provides a target (full value) price of OneMain Holdings at $50.20 a stock. We therefore believe that the stock of OneMain Holdings is undervalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $50.20 therefore we believe a good entry point into OneMain Holdings stock is at $52.10 or below. We expect the stock of OneMain Holdings to kick up from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it undervalued at this point in time.
Since the stock of OneMain Holdings is trading at below our suggested entry point into the stock we rate OneMain Holdings as a buy
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $50.20 therefore we believe a good entry point into OneMain Holdings stock is at $52.10 or below. We expect the stock of OneMain Holdings to kick up from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it undervalued at this point in time.
Since the stock of OneMain Holdings is trading at below our suggested entry point into the stock we rate OneMain Holdings as a buy
Next earnings release of OneMain Holdings
It is expected that OneMain Holdings will release their 1st quarter 2020 earnings report in early May 2020