10 Best Quality Stocks to Buy According to Analysts

5. SLM Corp. (NASDAQ:SLM)

Average Upside Potential: 22.67%

Number of Hedge Fund Holders: 24

SLM Corp. (NASDAQ:SLM) provides consumer banking. Initially, a government entity that serviced federal education loans, it then became private and began offering private student loans. It now offers both private student loans and federal student loans, as well as refinancing options for existing loans, to make education more affordable and accessible.

The company had strong business performance, better credit quality, and a gain from selling a loan in Q2 2024. It made $691 million in new loans in the second quarter, 6% more than last year. A gain of $112 million was realized from a loan sale. The average FICO score of borrowers increased from 747 to 752, and more borrowers are using cosigners, 80% in Q2 2024 compared to 76% in Q2 2023. The credit performance has improved with net charge-offs on private education loans lower year-over-year at 2.19% of average private education loans in repayment.

Despite such improvements, revenue in the second quarter of 2024 was down 3.74% from a year-ago period, accounting for $372.17 million in revenue. FAFSA completion rates are down 11% through mid-July this year, but management expects this to improve. This of course impacts enrollments negatively. However, new enrollments in programs are normalizing. Most borrowers have exited the extended grace program. Delinquencies are as expected. Loan modification programs are successful, with 84% of borrowers making payments now, compared to 64% before COVID.

The company has demonstrated improved credit quality, effective loss mitigation programs, a strong capital position, and a commitment to returning value to shareholders through share repurchases. Its financial health and strategic initiatives suggest a promising future.