How SLM's (SLM) Share Buybacks and Lower Earnings Are Shaping Its Capital Allocation Story

• SLM Corporation announced second quarter and half-year 2025 earnings, reporting net income of US$71.27 million for the quarter and US$375.81 million for the six months, each lower than the previous year, alongside updates on a share repurchase program and the declaration of third-quarter dividends on common and preferred stock.
• An interesting insight is that SLM has now completed buybacks totaling 6.94% of shares outstanding, signaling ongoing capital return to shareholders despite recent earnings declines.
• We’ll examine how SLM’s completion of a significant share repurchase tranche might reshape its current investment narrative and future prospects.

Explore 26 top quantum computing companies leading the revolution in next-gen technology and shaping the future with breakthroughs in quantum algorithms, superconducting qubits, and cutting-edge research.

SLM Investment Narrative Recap

For investors to be comfortable owning SLM, they need confidence that the company can maintain its leading position in the private student loan market while expanding its loan origination volumes as federal reforms shift loan demand. The recent Q2 results highlighted weaker earnings, but they have not materially altered the short-term catalyst: SLM’s ability to capture a larger share of displaced federal loan volume. The biggest risk remains elevated credit risk from persistent or rising delinquency rates, which could pressure margins if borrower conditions worsen; this risk maintains high relevance post-earnings.

Among the recent announcements, the substantial buyback update stands out. SLM completed repurchases totaling nearly 15 million shares, equating to 6.94% of shares outstanding. While this signifies continued capital return to shareholders, the move does not directly counterbalance the impact of rising credit risk, which continues to be closely monitored as it could challenge future earnings momentum in the context of the private loan market’s shift.

By contrast, not all investors may realize how SLM’s exposure to rising delinquency and net charge-off rates...

Read the full narrative on SLM (it's free!)

SLM's outlook forecasts $2.0 billion in revenue and $918.9 million in earnings by 2028. This projection is based on a 17.4% annual revenue growth rate and a $493.6 million increase in earnings from the current level of $425.3 million.

Uncover how SLM's forecasts yield a $39.00 fair value, a 22% upside to its current price.

Exploring Other Perspectives

Two Simply Wall St Community members estimate SLM’s fair value between US$39.00 and US$56.99 per share. While opinions differ widely, persistent credit risk and borrower repayment uncertainty remain key factors shaping the company’s outlook.

Explore 2 other fair value estimates on SLM - why the stock might be worth as much as 79% more than the current price!

Build Your Own SLM Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your SLM research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.
• Our free SLM research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate SLM's overall financial health at a glance.

Contemplating Other Strategies?

Every day counts. These free picks are already gaining attention. See them before the crowd does:

• Trump's oil boom is here - pipelines are primed to profit. Discover the 22 US stocks riding the wave.
• Rare earth metals are the new gold rush. Find out which 25 stocks are leading the charge.
• These 15 companies survived and thrived after COVID and have the right ingredients to survive Trump's tariffs. Discover why before your portfolio feels the trade war pinch.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com