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 worries about economic uncertainty and potential market volatility have kept sentiment in check, and over the past six months, the industry's 5.6% return has trailed the S&P 500 by 5.7 percentage points.
Investors should tread carefully as many of these firms are also cyclical, and any misstep can have you catching a falling knife. Keeping that in mind, here are three financials stocks best left ignored.
Nasdaq (NDAQ)
Market Cap: $56.06 billion
Originally founded in 1971 as the world's first electronic stock market, Nasdaq (NASDAQ: NDAQ) operates global exchanges and provides technology, data, and corporate services that help companies, investors, and financial institutions navigate capital markets.
Why Do We Think Twice About NDAQ?
- Incremental sales over the last two years were less profitable as its 9.2% annual earnings per share growth lagged its revenue gains
Nasdaq’s stock price of $98.23 implies a valuation ratio of 26.6x forward P/E. If you’re considering NDAQ for your portfolio, see our FREE research report to learn more.
CME Group (CME)
Market Cap: $99.46 billion
Born from the Chicago Mercantile Exchange founded in 1898 as a butter and egg trading venue, CME Group (NASDAQ: CME) operates the world's largest derivatives marketplace where traders can buy and sell futures and options contracts across interest rates, equities, currencies, commodities, and more.
Why Are We Cautious About CME?
- Annual revenue growth of 5.4% over the last five years was below our standards for the financials sector
- Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 9.8% annually
CME Group is trading at $275.55 per share, or 24.4x forward P/E. Dive into our free research report to see why there are better opportunities than CME.
Perella Weinberg (PWP)
Market Cap: $1.16 billion
Founded in 2006 by veteran investment bankers Joseph Perella and Peter Weinberg during a wave of boutique advisory firm launches, Perella Weinberg Partners (NASDAQ: PWP) is a global independent advisory firm that provides strategic and financial advice to corporations, financial sponsors, and government institutions.
Why Do We Pass on PWP?
- Earnings per share have dipped by 30% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Negative return on equity shows management lost money while trying to expand the business
At $17.44 per share, Perella Weinberg trades at 15.1x forward P/E. Read our free research report to see why you should think twice about including PWP in your portfolio.
Stocks We Like More
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