Axos Financial

Axos Financial Inc is assigned a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 5% discount to our quantitative fair value estimate of $93.62 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's solid growth bolsters our quantitative valuation. Consistent revenue and earnings growth indicates a company's potential for increased market share and profitability. Reflecting the firm's growth is its EPS 5-year growth of 18.9%, which lies in the top 30% compared with global peers. The robust five-year track record of EPS growth is reason to be optimistic about the firm's shares. We believe this is a sign that shares could be undervalued.

Alternatively, the firm's unfavorable dividend structure is potentially concerning. Dividends represent a stable form of future cash flows returned to shareholders, and low dividend payments can increase the perceived risk of a business. The firm's forward dividend yield of 0%, for example, sits in the bottom 30% compared with global peers. This could imply a planned dividend cut or relatively high share price, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

With its quantitative economic moat rating of none, this business is unlikely to consistently outearn its cost of capital without structural protection from competition. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.