On Thursday, BMO (TSX:BMO) Capital Markets adjusted its stock price target on Enova International (NYSE:ENVA), increasing it to $62 from $60, while maintaining a Market Perform rating on the stock. The adjustment follows Enova's first-quarter 2024 net revenue surpassing expectations and the company providing a positive outlook for the near term.
The analyst firm cites several factors for the revised price target, including accelerated loan growth driven by small and medium-sized businesses (SMB), a reduction in share count due to accretive buybacks, and expectations for continued strong performance despite anticipated increases in marketing and interest expenses.
Enova's recent financial activities have demonstrated a robust buyback strategy, with a record number of shares, over 8% of the outstanding stock, repurchased. The company still has a capacity of $65 million for further buybacks under the constraints of its senior note covenants.
BMO Capital has recognized Enova's strong solvency position, highlighted by a tangible common equity to total assets (TCE/TA) ratio of 20%, and its cost of equity (CoE), with a return on tangible common equity (RoTCE) of 26% relative to twice the price to tangible common equity (P/TCE).
The new stock price target of $62 is based on a valuation of 1.7 times the projected two-year-forward tangible common equity (TCE), which in turn is derived from an anticipated 28% return on tangible common equity (RoTCE) and a target price-to-earnings (P/E) ratio of six times. This valuation reflects the firm's recognition of Enova's financial strategies and performance metrics.
Enova International, which operates in the financial services sector, has been actively managing its capital through share repurchases, a move that BMO Capital views favorably. The firm's commentary underscores the balance between Enova's investment in growth opportunities and its efforts to deliver value to shareholders through buybacks.
InvestingPro Insights
As Enova International (NYSE:ENVA) garners attention with its upwardly revised price target from BMO Capital Markets, real-time data from InvestingPro further enriches the investment narrative. A notable P/E Ratio of 11.06, which adjusts to an even more attractive 10.04 for the last twelve months as of Q1 2024, underscores the company's earnings power relative to its share price.
Moreover, Enova's solid revenue growth, with a 7.49% increase over the last twelve months and an impressive 15.54% quarterly surge as of Q1 2024, signals robust business expansion.
InvestingPro Tips reveal that Enova's management has been assertively repurchasing shares, aligning with BMO Capital's observations and potentially signaling confidence in the company's future.
Furthermore, a strong return of 75.82% over the last six months points to significant investor optimism. These metrics, combined with the fact that Enova is trading near its 52-week high, with a price at 97.75% of that peak, suggest a firm market endorsement of its current trajectory.
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