UPDATE: Seaport Global Securities Starts OneMain (OMF) at Neutral

(Updated - December 2, 2021 6:40 AM EST)

Seaport Global Securities analyst Bill Ryan initiates coverage on OneMain (NYSE: OMF) with a Neutral rating.

The analyst comments "We are initiating coverage of OneMain Financial with a Neutral rating and 2022 and 2023 EPS estimates of $9.20 and $9.30, respectively. Our rating reflects a number of counterbalancing factors, but largely centers on our belief that the credit normalization process will likely keep the valuation of shares range bound between 5x-7x forward earnings reflecting a late cycle valuation. On the positive side of the investment thesis, we expect capital returns in the form of regular and special dividends, as well as share repurchases, to remain very high given strong capital generation of the business model which is well in excess of what is needed to support growth. Moreover, the attributes of the business model should make it more resilient in economic downturns than fully appreciated by the investment community, and the shares are basically trading at a late cycle valuation on earnings at present. Counterbalancing these factors are late cycle investor perceptions that will likely inhibit valuation expansion potential, a wholesale funded business model which can be more volatile in downturns, and that the company is run with a modestly more aggressive capital structure. Direct auto lending also represents OMF's primary secured loan product, and there is some concern about the impact of declining used car prices at some point in the future. Given this thesis, we believe the primary form of return for investors will be regular and special dividends collectively generating a low- to mid-teens return for investors, and we could be more constructive on the shares if we believe investors will become more confident in the economic outlook to assign a mid-cycle valuation."

For an analyst ratings summary and ratings history on OneMain click here. For more ratings news on OneMain click here.

Shares of OneMain closed at $50.86 yesterday.

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