Over the past six months, Sallie Mae’s stock price fell to $27.17. Shareholders have lost 17.1% of their capital, which is disappointing considering the S&P 500 has climbed by 11.3%. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Following the drawdown, is now a good time to buy SLM? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On SLM?
Originally created as a government-sponsored enterprise before privatizing in 2004, Sallie Mae (NASDAQ: SLM) is a financial services company that provides private education loans, savings products, and educational resources to help students and families pay for college.
1. EPS Increasing Steadily
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sallie Mae’s EPS grew at a solid 15.1% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.
2. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Sallie Mae has averaged an ROE of 34.5%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Sallie Mae has a strong competitive moat.
Final Judgment
These are just a few reasons why Sallie Mae ranks highly on our list. With the recent decline, the stock trades at 9× forward P/E (or $27.17 per share). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .
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