N1 Holdings Limited (ASX:N1H), a AUDA$6.93M small-cap, is a financial services company operating in an industry, which is impacted by macroeconomic factors such as interest rate changes and inflation. House price index and the stock market rebound are also indicators of higher consumer and business appetite for credit. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 6.83% in the upcoming year . An interesting question to explore is whether we can we benefit from entering into the mortgage and thrift sector right now. In this article, I’ll take you through the sector growth expectations, as well as evaluate whether N1 Holdings is lagging or leading its competitors in the industry. See our latest analysis for N1 Holdings
What’s the catalyst for N1 Holdings’s sector growth?
The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. In the previous year, the industry saw growth in the teens, beating the Australian market growth of 6.90%. N1 Holdings lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means N1 Holdings may be trading cheaper than its peers.
Is N1 Holdings and the sector relatively cheap?
Mortgage and thrifts companies are typically trading at a PE of 18x, in-line with the Australian stock market PE of 18x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 7.37% compared to the market’s 11.87%, potentially indicative of past headwinds. Since N1 Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge N1 Holdings’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? N1 Holdings recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto N1 Holdings as part of your portfolio. However, if you’re relatively concentrated in mortgage and thrifts, you may want to value N1 Holdings based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If N1 Holdings has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the mortgage and thrifts industry. However, before you make a decision on the stock, I suggest you look at N1 Holdings’s future cash flows in order to assess whether the stock is trading at a reasonable price, as well as other important fundamentals such as the company’s financial health in order to build a holistic investment thesis.
For a deeper dive into N1 Holdings’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.