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Analysts expect its EPS to remain negative in its about-to-be-reported quarter (ended June 30, 2021) and for its fiscal year 2021. Furthermore, HOOD’s trailing-12-month ROTA is negative, compared to the 1.29% industry average. The stock looks highly overvalued at its current price level, considering the company’s bleak growth prospects. In terms of forward P/S, the stock’s 18.01x is 440.3% higher than the 3.33x industry average. So, we think it wise to avoid the stock now.
However, rising financial transactions and capital market activities are driving the financial sector’s growth. And the Fed signaled two interest rate hikes as soon as early 2023, which should help financial companies increase their interest income. According to Globe Newswire, the global financial services market is expected to grow at a 9.9% CAGR to hit $22.5 trillion this year. So, instead of betting on HOOD, we think it could be wise to bet on shares of quality financial services stocks Discover Financial Services (NYSE:DFS), Synchrony Financial (NYSE:SYF), KeyCorp (KEY), and Raymond James Financial, Inc. (NYSE:RJF). All are well-positioned to capitalize on the industry tailwinds.
