The stock markets have experienced significant volatility in the past month, erasing the election-led rally. Enova International, Inc. ENVA has not been immune to this broader market meltdown.
In the past month, ENVA shares have lost 15.6%. It has underperformed the industry, the Zacks Finance sector and the S&P 500 index. Also, the stock has performed worse than its close peers — Ally Financial Inc. ALLY and Credit Acceptance Corporation CACC.
ENVA’s One-Month Price Performance
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The recent market slump has primarily been caused by the ongoing tariff war, as President Trump’s tariffs lead to retaliation, raising concerns of a full-scale trade war. Also, economic data reflects a slowdown in the U.S. economy, with manufacturing and business activity stalling, job growth weakening and consumer confidence declining. Inflationary pressure has been high, too, fueled by rising prices of groceries, gasoline and rent, with consumer inflation expectations reaching their highest level since November 2023. These factors resulted in ambiguity and fear in the market, exacerbating the downturn.
Given the uncertain and volatile backdrop, let us decipher whether this consumer loan provider is worth adding to your portfolio.
Solid Loan Growth to Support Revenues: ENVA’s revenue growth has been impressive over the past few years, driven by solid loan growth and higher interest rates. The company’s revenues, and loans and finance receivables witnessed a compound annual growth rate (CAGR) of 17.7% and 48.6%, respectively, over the last five years (2019-2024).
ENVA’s Revenue Trend
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Enova, which is a Chicago-based online lending firm, has been driving loan growth through its lending programs, including the Credit Services Organization program in Texas, which helps expand its reach while mitigating risks by acting as a loan arranger rather than a direct lender. Additionally, its Bank Programs in the United States and Brazil allow the company to facilitate loans without directly originating them, reducing regulatory burdens and providing greater flexibility in scaling its lending operations.
This, combined with other lending products, enables ENVA to expand loan originations and generate higher interest income. Moreover, Enova has a money transfer business — Pangea, aiding fee income and benefits from exchange rate spreads. Thus, a diversified revenue mix enables the company to earn sustainable revenues.
ENVA has been penetrating the existing markets through solid brands and direct marketing. With this, the company has been diversifying its offerings over the years. ENVA offers installment loans, lines of credit and small business financing with flexible terms, risk-tiered rates and performance-based fee reductions.
Thus, Enova’s solid net loans and finance receivables, and product diversification efforts will continue to support revenues.
The rise of e-commerce and online financial services has driven the demand for alternative lending, particularly among underbanked consumers and small businesses that have limited access to traditional lending. Enova aims to capitalize on this opportunity by leveraging its digital solutions to address this market. The company estimates a $78-billion U.S. consumer lending opportunity and a $308-billion small business loan market.
Sales Estimates
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Superior Technology Enables Expansion: Enova has been leveraging technology to increase lending activities and mitigate costs. Given the company’s first-mover advantage, it has accumulated more than 85 terabytes of accessible consumer behavior data from more than 65 million transactions.
This database enables enhanced underwriting, leading to lower default risks. This ensures consistent revenue growth.
Additionally, Enova leverages proprietary analytics, machine learning and more than 20 years of lending data to enhance credit decision-making, surpassing the traditional Fair Isaac Corporation score-based assessments. ENVA’s scalable, flexible technology platform supports efficient expansion, enabling rapid growth with minimal infrastructure investment. The company has only incurred an average capital expenditure of 2.1% of revenue per year over the past three years.
In 2020, ENVA acquired OnDeck to expand its small business lending and funding. In 2021, it acquired Pangea to foray into international money transfer services.
Thus, robust technological use and strategic buyouts will continue to aid the company in expanding its business, alongside strengthening the quality of its customer base.
Encouraging Capital Distributions: As of Dec. 31, 2024, Enova's cash and cash equivalents (including restricted cash) totaled $322.7 million. It had a long-term debt of $3.6 billion as of the same date. The company had $944 million of revolving credit facilities available.
Despite its decent liquidity position, ENVA has never paid out dividends since its inception. The company relies on share repurchases to reward shareholders. In August 2024, the company announced a repurchase plan worth $300 million, which is set to expire on Dec. 31, 2025. As of Dec. 31, 2024, shares worth $234.6 million were available for repurchase under the existing authorization.
The company’s decent liquidity position will likely help to maintain sustainable share buybacks going forward.
Over the past month, the Zacks Consensus Estimate for Enova’s 2025 earnings of $11.50 per share has been revised 1.5% upward, whereas the same for 2026 earnings has been raised marginally to $13.65.
Estimate Revision Trend
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The projected figures imply year-over-year earnings growth of 25.7% and 18.7% for 2025 and 2026, respectively.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
ENVA is utilizing shareholders’ funds efficiently. This is demonstrated by the company’s return on equity (ROE) of 19.94%, which compares favorably with the industry’s 13.09%.
Return on Equity Trend
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Similarly, as of the same date, ALLY and CACC had ROEs of 9.31% and 29.01%, respectively.
Enova is well-positioned for growth, given its solid loan growth, growth programs, acquisitions and improving fee income. Bullish analyst sentiment and product diversification efforts are other positives.
However, a steady rise in expenses is a headwind. The company recorded a five-year CAGR of 23.9% (ended 2024) due to higher marketing, and general and administrative expenses. Overall expenses are expected to be elevated in the near term due to the company’s business expansion efforts.
Expense Trend
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In terms of valuation, Enova’s price-to-book ratio (P/B) of 2.03X is higher than the industry's 0.80X. Thus, the stock is trading at a premium. This suggests that investors may pay a higher price than the company's expected earnings growth.
P/B Ratio
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Nonetheless, technology-driven lending will likely boost operational efficiency in the long run and support business expansions at minimal capital expenditure. Moreover, a decent balance sheet and liquidity position suggest financial stability.
Thus, the Enova stock remains a lucrative bet for long-term investors.
Currently, ENVA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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