Financial providers use their expertise in capital allocation and risk assessment to help facilitate economic growth while offering consumers and businesses essential financial services. But uncertainty about fiscal and monetary policy has tempered enthusiasm, limiting the industry’s gains to 3.1% over the past six months. This return lagged the S&P 500’s 7.5% climb.
Despite the lackluster result, a few diamonds in the rough can produce earnings growth no matter what, and we started StockStory to help you find them. Taking that into account, here are two financials stocks we think can generate sustainable market-beating returns and one we would avoid.
One financials stock to sell:
Encore Capital Group (ECPG)
Market cap: $2.17 billion
Operating in the often misunderstood world of debt collection since 1999, Encore Capital Group (NASDAQ:ECPG) purchases portfolios of defaulted consumer debt at deep discounts and works with individuals to recover these obligations while helping them toward financial recovery.
Why Is ECPG Not Exciting?
- Annual revenue growth of 3.1% over the last five years was below our standards for the financials sector
- Low return on equity reflects management’s struggle to allocate funds effectively
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $101.65 per share, Encore Capital Group trades at 1.8x forward P/B. Dive into our free research report to see why there are better opportunities than ECPG.
Two financials stocks to watch:
BNY (BNY)
Market cap: $100.5 billion
Tracing its roots back to 1784 when it was founded by Alexander Hamilton, BNY (NYSE:BNY) is a global financial institution that provides asset servicing, wealth management, and investment services to institutions, corporations, and high-net-worth individuals.
Why Do We Like BNY?
- Decent 9.6% annual revenue growth over the last two years beat most of its peers, showing customers find value in its products and services
- Share repurchases over the last two years enabled its annual earnings per share growth of 27.9% to outpace its revenue gains
- Impressive 15.7% annual tangible book value per share growth over the last two years indicates it’s building equity value this cycle
BNY is trading at $150.11 per share, or 14.7x forward P/E. Is now a good time to buy? See for yourself in our full research report, it’s free.
Synchrony Financial (SYF)
Market cap: $23.97 billion
Powering over 73 million active accounts and partnerships with major brands like Amazon, PayPal, and Lowe's, Synchrony Financial (NYSE:SYF) provides credit cards, installment loans, and banking products through partnerships with retailers, healthcare providers, and digital platforms.
Why Does SYF Stand Out?
- Earnings per share have massively outperformed its peers over the last two years, increasing by 28.9% annually
- Impressive 14.2% annual tangible book value per share growth over the last five years indicates it’s building equity value this cycle
- Market-beating return on equity illustrates that management has a knack for investing in profitable ventures
Synchrony Financial’s stock price of $76.70 implies a valuation ratio of 7.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks we like even more
ONE MORE THING: Top 6 Stocks for This Week. This market is separating quality stocks from expensive ones fast. AI is taking down whole sectors with no warning. In a rotation this fast, you need more than a list of good companies.
Our AI system flagged Palantir before it ran 1,662% between October 2022 and February 2026. AppLovin before it ran 753% between February 2024 and February 2026. Nvidia before it ran 1,178% between January 2023 and February 2026. Each week it produces 6 new names that pass the same tests. Get Our Top 6 Stocks for Free HERE.
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.