Navient Q3 Earnings: Is NasdaqGS:NAVI Cheap at 3.3x Forward P/E?

in EARNINGS/INVESTING IDEAS by

Navient Corporation (NasdaqGS:NAVI) is scheduled to report Q3 earnings results after markets close for trading on October 20, 2020.

The company is expected to report earnings of $0.79/share on revenue of $279.5 million. The consensus earnings per share (EPS) of $0.79/share is based on a poll of 10 analysts and represents a growth in eps of 27.9% over the same quarter last year, when the company reported earnings of $0.62/share.

The revenue forecast of $279.5 million based on a poll of 6 analysts implies a year-over-year (YoY) decline in revenue of −9.6%. Last year the company reported $309 million in revenue for the quarter.

Expected to report EPS growth of 27.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $279.48 $309.00 −9.6%
EPS $0.79 $0.62 27.9%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Navient Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.42 $0.91 118.5% Beat
Q1, 2020 $0.45 $0.51 13.8% Beat
Q4, 2019 $0.58 $0.67 14.7% Beat
Q3, 2019 $0.57 $0.62 8.8% Beat
Q2, 2019 $0.53 $0.74 39.1% Beat
Q1, 2019 $0.45 $0.58 28.7% Beat
Q4, 2018 $0.47 $0.58 23.8% Beat
Q3, 2018 $0.49 $0.53 7.7% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 13.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
July 21, 2020 $7.06 $7.98 13.0% Increase
April 21, 2020 $7.06 $6.60 −6.5% Decline
January 21, 2020 $13.86 $15.18 9.5% Increase
October 22, 2019 $11.96 $12.94 8.2% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.54, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.54 implies a 0.6% chance of earnings manipulation.

Fundamentals And Technical Analysis

Navient Corporation is currently trading at $9.94/share, up 1.5% for the day. The company is trading at approximately 64.0% of its 52-week high of $15.50/share. The company’s stock price is up 24.6% since the last earnings report and up 1.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 61.15 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:NAVI Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 5.73 and a forward P/E multiple of 3.35.

Navient Corporation’s current share price also implies a price-to-book (P/B) multiple of 0.91. The following table summarizes some other key fundamental ratios:

Data as of October 19, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $9.94
P/E Ratio 5.7x
P/E Ratio (Fwd) 3.3x
PEG Ratio −0.4
Total Debt / Total Capital 97.9%
Levered Free Cash Flow $1.092 billion
Price To Sales 1.3x

Finbox

Navient Corporation is a small-cap stock with a market capitalization of $1.899 billion. The company operates in the Financials sector and the Consumer Finance industry.

Navient Corporation provides education loan management and business processing solutions for education, healthcare, and government clients at the federal, state, and local levels in the United States. It operates through four segments: Federal Education Loans, Consumer Lending, Business Processing, and Other. The company holds and acquires Federal Family Education Loan Program loans that are insured or guaranteed by state or not-for-profit agencies; and performs servicing and asset recovery services on its own loan portfolio, and federal education loans owned by the United States Department of Education and other institutions. It also holds, originates, and acquires consumer loans; and performs servicing activities on its own education loan portfolio, including private education loans, and private education refinance loans. In addition, the company offers revenue cycle management and business processing services; and healthcare services that include revenue cycle outsourcing, accounts receivable management, extended business office support, and consulting engagement for federal, state, and municipal clients; public authorities; and healthcare organizations. Further, it provides customizable solutions for its clients that include hospitals, hospital systems, medical centers, large physician groups, and other healthcare providers; and corporate liquidity portfolio and debt repurchase services. The company was founded in 1973 and is headquartered in Wilmington, Delaware.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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