OneMain Holdings (OMF): Examining Valuation After Strong Growth in Earnings and Capital Returns

OneMain Holdings (OMF) stock has been getting attention as the company delivered meaningful growth in both revenue and net income over the past year. This has helped boost shares and attract new investors.

See our latest analysis for OneMain Holdings.

The latest 10.55% 1-month share price return has turned heads, pushing OneMain Holdings to $61.93 per share as the company’s strong capital returns and consistently high dividend yield bring in more yield-hungry investors. Momentum is clearly building, as seen in a 19.49% year-to-date share price return and an impressive 158% total shareholder return over five years. This highlights long-term confidence in the business and its shareholder-focused strategy.

If this kind of performance has you thinking bigger, now’s an ideal time to discover fast growing stocks with high insider ownership.

The question now is whether OneMain Holdings is still trading at a discount after its surge, or if investors are already pricing in all the future growth. Could there be more room to run, or has the window closed?

Most Popular Narrative: 6.5% Undervalued

With shares of OneMain Holdings closing at $61.93, the latest consensus narrative sees fair value at $66.21. This is about $4 above the current price and suggests the stock still has some upside. The market has reacted to recent profitability and capital return improvements, but there is growing debate about the company's next move.

Management's commitment to robust shareholder capital returns, via a 7% dividend yield and escalating buybacks now ahead of the prior year, provides a catalyst for EPS growth and may attract additional yield-focused investors if the stock remains undervalued.

Read the complete narrative.

What quantitative magic is driving this premium? The narrative leans on ambitious forecasts, including both earnings and revenue growth, as well as compressed profit multiples. Only by reading on can you uncover the bold financial targets set by analysts fueling this fair value.

Result: Fair Value of $66.21 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, continued economic pressure on lower-income borrowers and intensifying competition from fintech lenders could present challenges for OneMain Holdings in maintaining its growth momentum and credit quality outlook.

Find out about the key risks to this OneMain Holdings narrative.

Another View: What Do The Multiples Say?

Taking a closer look at valuation through earnings multiples offers a different perspective. OneMain Holdings trades at 10.3x earnings, which is slightly higher than the US Consumer Finance industry average of 9.7x, but well below the substantial 44.4x peer average. The fair ratio is 17.3x, suggesting there could be room for reevaluation if market sentiment changes. Are investors overlooking upside, or does this gap indicate a reason to pause?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own OneMain Holdings Narrative

If you have a different perspective or want to dig into the numbers yourself, you can craft your own narrative in just a few minutes. Do it your way

A great starting point for your OneMain Holdings research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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