On Thursday, BMO Capital Markets adjusted its outlook on OneMain Holdings, Inc. (NYSE:OMF) shares, a leading consumer finance company, by increasing its price target to $50 from the previous $48. The firm reaffirmed its Market Perform rating on the stock.
The revision follows OneMain's first quarter 2024 results, which met expectations, and the company's confirmation of its financial guidance for the year. The analyst at BMO Capital noted a minor reduction in projected earnings by 1%, attributing it to a slight decrease in net interest income. However, this was somewhat compensated by reductions in credit and operating expenses.
OneMain also announced an increase in its dividend and continued to buy back shares, offering a total yield of 9%. The analyst highlighted that improved delinquency trends, which exceed normal seasonal patterns, suggest that credit losses could reach their highest point in the first half of 2024. Nonetheless, there is a concern that rising unemployment rates could lead to a resurgence in delinquencies and delay the peak in credit losses.
The new price target of $50 is based on a 2.9 times multiple of the two-year-forward tangible common equity (TCE), which is derived from a 49% return on tangible common equity (RoTCE) and a target price-to-earnings (P/E) ratio of 6 times. This valuation reflects the analyst's view of the company's financial prospects and market position.
InvestingPro Insights
OneMain Holdings (NYSE:OMF) has shown a strong financial performance with a noteworthy P/E ratio of 9.85, reflecting investor confidence in its earnings potential. The company's dividend yield stands at an attractive 7.88%, which may appeal to income-focused investors. Moreover, OneMain has experienced a substantial 6-month price total return of 39.26%, indicating robust investor interest and market performance.
InvestingPro Tips highlight that OneMain has been profitable over the last twelve months and analysts remain optimistic about its profitability for the current year. The company's stock price movements have been quite volatile, which could present opportunities for investors with a higher risk tolerance. For those considering an investment in OneMain, there are additional InvestingPro Tips available to provide deeper insights into the company's financial health and market prospects.
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