On Thursday, Wells Fargo (NYSE:WFC) adjusted its outlook on OneMain (NYSE:OMF) shares, increasing the price target to $53.00 from the previous $48.00 while maintaining an Equal Weight rating. The adjustment follows the observation of encouraging credit trends within the company.
OneMain's credit performance indicators have shown improvement, with the 30-89 day delinquency rate decreasing by 56 basis points quarter over quarter in Q1'24. This reduction surpasses typical seasonal trends recorded in previous years, such as a 30 basis point decrease in 2018 and a 49 basis point decrease in 2019. The positive shift in credit trends is a key factor in the revised price target.
Despite the overall improved credit metrics, older loan vintages, which now constitute 29% of OneMain's receivables, continue to represent nearly half of all delinquencies. This detail underscores the ongoing risks within a portion of the company's loan portfolio.
OneMain's underwriting approach remains cautious amid a complex macroeconomic environment with numerous fluctuating factors. The company is navigating through these uncertainties with a careful strategy to mitigate potential risks.
Looking ahead, OneMain is identified as having promising growth potential in its newer product offerings. The firm is particularly optimistic about the prospects in the auto finance and credit card segments, which are expected to contribute to the company's future performance.
InvestingPro Insights
Following Wells Fargo's updated outlook on OneMain (NYSE:OMF), it's valuable to consider additional financial metrics and InvestingPro Tips to provide a broader investment perspective. OneMain's market capitalization stands at approximately $6.08 billion, with a Price to Earnings (P/E) ratio of 10.16, reflecting investor sentiment on the company's earnings capacity. Notably, the adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly lower at 9.85, potentially indicating a more favorable view of the company's sustained profit generation.
Investors may also be interested in the company's dividend profile, as OneMain pays a significant dividend with a yield of 7.88%. This is accompanied by a dividend growth of 5.26% for the same period, which could appeal to income-focused investors. Moreover, the company's stock price has experienced a large uptick over the last six months, with a total return of 39.26%, and an impressive one-year price total return of 51.32%, suggesting strong market performance.
For those considering a deeper dive into OneMain's investment potential, there are additional InvestingPro Tips available. These include insights into earnings revisions, stock price volatility, and profitability predictions. In fact, there are 8 more tips on OneMain available on InvestingPro. To explore these valuable insights, visit https://www.investing.com/pro/OMF and remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.