3 Financials Stocks with Competitive Advantages

Financial institutions play a critical role, offering everything from consumer banking to wealth management and specialized financial solutions. But uncertainty about fiscal and monetary policy has tempered enthusiasm, limiting the industry's gains to 2.2% over the past six months. This return lagged the S&P 500's 9.9% climb.

Only some companies are subject to these dynamics, however, and a handful of high-quality businesses can deliver earnings growth in any environment. With that said, here are three financials stocks we think can generate sustainable market-beating returns.

Federated Hermes (FHI)

Market Cap: $3.85 billion

With roots dating back to 1955 and a pioneering role in money market funds, Federated Hermes (NYSE:FHI) is an investment management firm that offers a wide range of funds and strategies for institutional and individual investors.

Why Are We Fans of FHI?

1. Share repurchases have amplified shareholder returns as its annual earnings per share growth of 22.7% exceeded its revenue gains over the last two years
2. ROE punches in at 25%, illustrating management’s expertise in identifying profitable investments

At $52.07 per share, Federated Hermes trades at 10.5x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free for active Edge members.

Synchrony Financial (SYF)

Market Cap: $30.05 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 Are We Bullish on SYF?

1. Share buybacks catapulted its annual earnings per share growth to 30.1%, which outperformed its revenue gains over the last two years
2. Balance sheet strength has increased this cycle as its 20.8% annual tangible book value per share growth over the last two years was exceptional
3. Market-beating return on equity illustrates that management has a knack for investing in profitable ventures

Synchrony Financial is trading at $83.43 per share, or 9.1x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free for active Edge members.

Paymentus (PAY)

Market Cap: $3.96 billion

Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE:PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.

Why Is PAY a Top Pick?

1. Annual revenue growth of 39% over the past two years was outstanding, reflecting market share gains this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 86.3% annually, topping its revenue gains

Paymentus’s stock price of $32 implies a valuation ratio of 44x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free for active Edge members.

Stocks We Like Even More

Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.

The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today.