The Best Financial-Services Stocks to Buy

Financial-services companies provide a wide range of vital services to millions of people—including credit cards, wealth and asset management, and products and research to make investing easier.

In the year to date, the Morningstar US Financial-Services Index rose 9.60%, while the Morningstar US Market Index gained 13.62%.

The 12 Best Financial-Services Stocks to Buy Now

These were the most undervalued financial-services stocks that Morningstar’s analysts cover as of Nov. 19, 2025.

1. Western Union WU
2. PayPal Holdings PYPL
3. MarketAxess Holdings MKTX
4. TransUnion TRU
5. FactSet FDS
6. LPL Financial Holdings LPLA
7. BNP Paribas BNPQY
8. Blue Owl Capital OWL
9. Blackstone BX
10. Cohen & Steers CNS
11. Ares Management ARES
12. Ally Financial ALLY

To come up with our list of the best financial-services stocks to buy now, we screened for:

• Financial-services stocks that are undervalued, as measured by our price/fair value metric.
• Stocks that earn narrow or wide Morningstar Economic Moat Ratings, as well as companies that do not have a moat. We think companies with narrow economic moat ratings can fight off competitors for at least 10 years; wide-moat companies should remain competitive for 20 years or more.
• Stocks that earn a Low, Medium, High, or Very High Morningstar Uncertainty Rating, which captures the range of potential outcomes for a company’s fair value.

Here’s a little more about each of the best financial-services stocks to buy, including commentary from the Morningstar analysts who cover each company. All data is as of Nov. 19, 2025.

Western Union

• Morningstar Price/Fair Value: 0.50
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 11.12%
• Industry: Credit Services

Credit services firm Western Union is the cheapest stock on our list of the best financial-services stocks to buy. Western Union provides domestic and international money transfers through its global network of over 500,000 outside agents. The stock is trading 50% below our fair value estimate of $17 per share.

Western Union’s performance in recent years has been weak, which we think has played into the idea that the company is being disrupted by newer players. But we think the pressures the company has faced historically will ease a bit going forward. We continue to believe Western Union has a narrow moat based on its sizable scale advantage, but with limited long-term growth prospects, the amount of value the moat will create could be questioned. Additionally, the company faces some political headwinds as well.

We think the current management team has a better approach and has instituted pricing reductions to stabilize volumes and allow the company to start to grow modestly over time off a better base. We also think that digital-only players will become less of an issue over time, as the ability to run ongoing losses is diminished going forward.

The company has been actively building out its presence in electronic channels in recent years to adapt to the change in the industry. Western Union saw a sharp spike in digital transfers at the beginning of the pandemic. Western Union achieved a 32% year-over-year increase in transaction growth in 2021 as this area of the company’s business jumped to about a fourth of revenue. More recently, results took a sharp negative turn, and management is attempting to get this side of the business back on track with investments in its platform and pricing actions.

We believe an aggressive approach is the best strategy, as Western Union positions itself to maintain its scale advantage despite the shift. In our view, scale and market share across all channels will be the dominant factor in long-term competitive position, and Western Union appears to be recovering its overall position. However, the growth that the company is seeing in digital transfers has not led to strong overall growth historically, and we don’t expect this situation to change.

In the near term, however, political headwinds in the US will likely offset any underlying improvements the company is making. The current administration’s aggressive efforts to reduce immigration are having a material impact on money transfers.

Read more about Western Union here.

PayPal Holdings

• Morningstar Price/Fair Value: 0.64
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 0.93%
• Industry: Credit Services

PayPal was spun off from eBay in 2015 and provides electronic payment solutions to merchants and consumers, with a focus on online transactions. The firm earns a narrow economic moat rating and the shares of its stock look 36% undervalued relative to our $94 fair value estimate.

PayPal’s development of a network of merchants and consumers early in the evolution of e-commerce allowed the company to build and maintain an enviable competitive position within the online payments channel. Historically, PayPal’s growth had been driven by the ongoing shift toward electronic payments and the rise of e-commerce, which the coronavirus pandemic temporarily accelerated. However, the company ran into headwinds as the positives from the pandemic reversed and new competition arose. Management has attempted to combat the pressure on top-line growth with a greater focus on cost control and product innovation, with the ultimate goal of shifting toward more profitable growth. We see this evolution as the right move, but it will likely take some time to fully execute. Additionally, PayPal’s online focus leaves it relatively exposed to a downturn in the economy, as online purchases tend to be discretionary. If the macro picture changes for the worse, this could offset any underlying improvements in the near term.

In the longer term, we see a mix of competitive opportunities and threats that create a fairly wide range of outcomes. PayPal remains a somewhat unique player within the payments space. We think this remains its key strength, but its position on both the merchant and consumer side could be challenged over the long run. On the merchant side, new online-focused acquirers have emerged, and financial technology innovation also appears to be concentrated in the e-commerce space. On the consumer side, services such as Apple Pay represent competition for PayPal. Competition on both sides could chip away at PayPal’s position. On the other hand, PayPal remains a preferred partner in the online space, and its Braintree business is becoming more profitable. In balance, we think the company can hold its own, but we recognize the potential to veer in either direction.

An additional attraction is Venmo. Efforts to monetize the platform are still in the early stages, and Venmo will likely not be a major driver anytime soon. But we believe it has the potential to create upside above our current fair value estimate.

Read more about PayPal Holdings here.

MarketAxess Holdings

• Morningstar Price/Fair Value: 0.64
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Forward Dividend Yield: 1.82%
• Industry: Capital Markets

Next on our list of the best financial-services stocks to buy is MarketAxess Holdings. Founded in 2000, MarketAxess is a leading electronic fixed-income trading platform that connects broker/dealers and institutional investors. The stock is trading at a 36% discount to our fair value estimate of $260 per share.

MarketAxess operates the leading platform for the electronic trading of corporate bonds. While the company is primarily focused on US securities, 35% to 45% of its corporate bond trading volume comes from emerging-markets debt and eurobonds, giving the company a strong international presence. MarketAxess also offers trading in US Treasuries and municipal bonds, bolstering its efforts in these sectors through the acquisitions of LiquidityEdge and MuniBrokers in 2019 and 2021, respectively. That said, corporate bonds are the core of MarketAxess’ business, which we expect to remain true, a consequence of being a relative newcomer to the Treasury trading market and the smaller size of the municipal debt market.

Fixed-income markets globally are increasingly moving away from voice-negotiated trading toward electronic trading platforms, as the liquidity and workflow enhancement of these electronic networks promise to lower implicit and explicit trading costs for increasingly expense-conscious firms. As MarketAxess rolls out new features such as automated trade execution and expands its Open Trading all-to-all network, the cost and liquidity advantages of electronic trading networks over traditional methods continue to increase.

So far, 2025 has been a decent year for MarketAxess, as more corporate bond issuance and higher market activity have been driving trading volume up. However, the high volume industrywide has been partially offset by weaker average pricing and market share issues. MarketAxess continues to face significant competition in the electronically traded US corporate bond market from both Tradeweb and the smaller Trumid, which has led its investment-grade bond market share to be relatively stagnant and even deteriorate in recent months. To make matters worse, while MarketAxess retains a leading position in the US high-yield bond market, performance has been bad for over a year, with the firm seeing a material decline in market share. MarketAxess has responded by increasing its investment in its software and data tools, but 2025 will prove to be a crucial test to see if the firm can correct the negative trends in its US corporate bond business.

Read more about MarketAxess Holdings here.

TransUnion

• Morningstar Price/Fair Value: 0.68
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Forward Dividend Yield: 0.56%
• Industry: Financial Data and Stock Exchanges

TransUnion is one of the three leading credit bureaus in the US, providing the consumer with information that is the basis for granting credit. Trading 32% below our fair value estimate, TransUnion has an economic moat rating of wide. We think shares of this stock are worth $120 per share.

TransUnion is one of the Big Three consumer credit bureaus, along with Equifax and Experian. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

TransUnion’s core business is selling credit reports to US lenders, but as this business is the most mature, the company has sought other avenues of growth. One avenue has been expanding beyond financial institutions into verticals such as insurance, rental screening, collections, and other sectors. The emerging verticals business was 29% of the firm’s revenue in 2024, up from 21% in 2009. We believe this will help TransUnion weather a downturn as this revenue is diversified across industries and less macro-sensitive.

TransUnion has sought to replicate its US playbook internationally. The most intriguing opportunity is in India, which, given the country’s large population, could be an evergreen source of growth for the firm. TransUnion’s early entry has allowed it to build a commanding market share here. While it will probably take many years to fully realize this market’s potential, we think the company’s leading position provides meaningful long-term upside.

Since its public debut in 2015, TransUnion’s acquisition strategy has run the gamut from smaller bolt-on deals to larger acquisitions. Examples of bolt-on deals include Tru Optik and Signal Digital, which provide data and analytics for digital marketing. TransUnion’s larger deals include the $1.4 billion acquisition of UK credit bureau Callcredit in 2018, its $3.1 billion acquisition of Neustar in 2021, and its $638 million purchase of Sontiq in 2021. We believe TransUnion’s acquisitions have generally made strategic sense and have not weakened the firm’s moat, but the use of variable-rate debt to finance the 2021 deals proved to be untimely.

Read more about TransUnion here.

FactSet

• Morningstar Price/Fair Value: 0.69
• Morningstar Uncertainty Rating: Medium
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 1.65%
• Industry: Financial Data and Stock Exchanges

FactSet provides financial data and portfolio analytics to the global investment community. FactSet is an affordable financial-services stock, trading at a 31% discount to our fair value estimate of $385 per share. The financial data firm earns a narrow economic moat rating.

FactSet has built an attractive subscription-based business providing data and analytics to the financial-services industry. FactSet is best known for its research solutions, which include its core desktop offering geared toward buy-side asset managers and sell-side investment bankers. Institutional buy-side, which includes asset managers, asset owners, and hedge funds, is FactSet’s largest client group at about half of the firm’s revenue.

Institutional buy-side and dealmakers, such as investment bankers, make up just under 70% of its annual subscription value, or ASV, but it is FactSet’s slowest-growing segment due to its maturity and pressures on asset managers and topsy-turvy investment banking dealmaking activity. FactSet’s fastest-growing segments are its wealth-management business and its partnerships and CUSIP Global Services business, but these businesses only account for just over 30% of FactSet’s annual subscription value.

FactSet has mostly grown organically, and its acquisition strategy has mostly focused on adding an additional data source or software capabilities. In March 2022, FactSet completed its purchase of CUSIP from S&P Global for $1.9 billion, its largest acquisition to date.

Historically, FactSet’s adjusted operating margins have been range-bound in the low to mid-30s. However, as the firm increases scale, margins have gone higher. At its September 2024 investor day, it guided to medium-term margins in the 37% to 38% range, and we believe this will be difficult to achieve. Investment spending suggests this will be a murky path, and FactSet’s initial fiscal 2026 outlook calls for margins of 34.8% at the midpoint, down from 36.3% in fiscal 2025.

Given consolidation in the financial technology industry, FactSet could become an acquisition target. The industry has seen large deals such as LSE Group acquiring Refinitiv and S&P Global acquiring IHS Markit. We believe FactSet’s recurring revenue model could be attractive to potential acquirers, including private equity firms.

Read more about FactSet here.

LPL Financial Holdings

• Morningstar Price/Fair Value: 0.71
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Forward Dividend Yield: 0.34%
• Industry: Capital Markets

LPL Financial is the largest US independent broker-dealer, with nearly 29,000 financial advisors affiliated with its platform and roughly 10 million associated customer accounts at the end of 2024. Trading 29% below our fair value estimate, LPL Financial Holdings has an economic moat rating of wide. We think shares of this stock are worth $504 per share.

In recent years, LPL Financial has prioritized growth in advisory headcount by expanding its affiliation models, broadening its array of higher-touch services and its product shelf, allowing it to better serve advisors with higher net worth clientele, and by engaging in strategic mergers and acquisitions. This, in turn, has allowed the company to generate scale over relatively fixed trading and back-office costs, strengthening its cost advantage relative to smaller independent broker/dealer competitors. Simultaneously, LPL has invested in a liquidity and succession program to help retiring advisors sell their practices while retaining assets in the firm’s ecosystem. Attributable primarily to these strategies, LPL has seen its advisor headcount grow to nearly 29,000 in 2024, a 7.3% annual growth rate during a decade in which overall advisor headcount grew just 0.3% (McKinsey), while maintaining an asset retention rate north of 97% during the period. Overall, we take a positive view of the firm’s strategy and expect its advantages to become even more entrenched moving forward as the industry continues to consolidate.

Looking ahead, we view the firm’s expansion of affiliation options and services as a nice option for investors, enabling LPL to compete for a larger chunk of the roughly $36 trillion in US-advised assets (Cerulli data, Morningstar estimates) at year-end 2024. Still, we expect the firm’s stronghold to remain the long tail of less productive financial advisors, who are generally attracted to LPL’s high payout rates (nearly 90%), competitive technology platform and product shelf, and solid service levels. The firm also outperforms its IBD peers in the institutional channel (insurance companies and banks), with those players generally viewing the broker/dealer as a partner rather than a competitor, given its lack of first-party asset management and insurance products.

We’re generally constructive regarding LPL Financial’s M&A strategy, but expect few prospective options—given the dearth of remaining midsize firms—for the company to engage in sizable deals like Atria (2024) or Commonwealth Financial Network (2025) in future years.

Read more about LPL Financial Holdings here.

BNP Paribas

• Morningstar Price/Fair Value: 0.74
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: None
• Forward Dividend Yield: 3.92%
• Industry: Banks - Regional

The merger of Banque Nationale de Paris and Paribas created BNP Paribas in 2000, making it the largest publicly traded bank in France. This cheap stock looks 26% undervalued and has a fair value estimate of $52 per share.

BNP Paribas has reported remarkably consistent earnings over the past decade—in an environment where many of its peers suffered from great earnings volatility. Reported earnings have not grown by much, on average, over this period and return on tangible equity was in the mid- to upper-single-digit range. However, interest rates have been at or below zero for most of the past decade. The return to normal monetary policy in the eurozone will support a structural increase in profitability for BNP Paribas to a low double-digit return on tangible equity. BNP Paribas’ midcycle profitability and earnings growth prospects are broadly in line with the average of the rest of the European banks that we cover, but its stable track record indicates it is a less risky prospect than many of its peers.

Retail banking in BNP Paribas’ French home market is a challenging industry. Despite the high level of concentration in the French retail banking sector, profitability has lagged cost of capital. Typically, there is a high correlation between industry concentration and profitability for banks. However, the French banking sector is dominated by mutually owned, regional banks. Because the owners and the clients of these banks are largely the same, the profit motive for the mutually owned banks is not as pronounced as it is for BNP Paribas and other listed banks.

BNP Paribas has been successful in investment banking and has actually looked to grow in this area when many of its European peers have pulled back from market-related activities. Typically, we view investment banking as a riskier area where many banks have run into trouble in the past. It is, however, often the smaller players that take outsize risks. BNP Paribas is arguably the only European bank that has the muscle to compete with the large US bulge-bracket investment banks. We believe BNP Paribas should continue to benefit from market share gains in investment banking.

The bancassurance model is well established in France, and combined with BNP’s asset-management operations, it allows BNP to capture substantial portions of the value chain on financial products.

Read more about BNP Paribas here.

Blue Owl Capital

• Morningstar Price/Fair Value: 0.77
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 6.53%
• Industry: Asset Management

Blue Owl Capital is one of the world’s largest alternative-asset managers, $295.6 billion in total managed assets, including $183.8 billion in fee-earning AUM, at the end of September 2025. Trading 23% below our fair value estimate, Blue Owl Capital has an economic moat rating of narrow. We think shares of this stock are worth $18 per share.

Blue Owl Capital has built a solid position in the alternative-asset management industry. It relies on its reputation, fairly broad product portfolio, investment performance history, and cadre of dedicated professionals to not only raise capital but maintain its standing as a go-to firm for institutional and high-net-worth investors looking for exposure to alternative assets. With $295.6 billion in total assets under management, or AUM, including $183.8 billion in fee-earning AUM, at the end of September 2025, Blue Owl is one of the world’s largest stand-alone alternative-asset managers.

The company’s portfolio is diversified across three main segments: GP Strategic Capital, which primarily acquires equity stakes in, and provides debt financing to, large, multi-product private equity and private credit firms, accounting for 22% of fee-earning AUM and 26% of base management fees during 2025, private credit (53% and 60%, respectively), and real estate/real assets (25% and 14%, respectively). The firm primarily serves clients in the institutional channel. With customer demand for alternatives strong and investors attempting to limit the number of providers they use, larger-scale players like Blue Owl are well-positioned.

Blue Owl has picked up a healthy $30.0 billion from fundraising efforts so far this year, leaving the firm on course to raise around $40 billion in new capital in 2025. The firm has also deployed $22.1 billion during the first nine months of the year. Given our concerns about fundraising, deployments, and realizations this year in light of increased uncertainty regarding economic growth, these were certainly positives to take away from the company’s results.

Looking ahead, we expect both fee-based earning growth and more normalized fundraising, deployment, and realization activity over time. This is reflected in our current 2025, 2026, and 2027 distributable EPS estimates of $0.83, $0.99, and $1.18, respectively, based on our expectations for distributable earnings of $1.3 billion. $1.5 billion, and $1.8 billion for the firm.

Read more about Blue Owl Capital here.

Blackstone

• Morningstar Price/Fair Value: 0.79
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Wide
• Forward Dividend Yield: 3.38%
• Industry: Asset Management

Blackstone is the world’s largest alternative-asset manager, with $1.242 trillion in total assets under management, including $906.2 billion in fee-earning assets under management, at the end of September 2025. Blackstone is an affordable financial-services stock, trading at a 21% discount to our fair value estimate of $175 per share. The asset-management firm earns a wide economic moat rating.

We consider Blackstone to be the preeminent alternative-asset manager, with $1.242 trillion in total assets under management, or AUM, including $906.2 billion in fee-earning managed assets, at the end of September 2025. The company operates with scale in each of its major product lines: private equity (26% of fee-earning AUM and 33% of base management fees), real estate/real assets (31% and 35%), private credit (34% and 25%), and other alternatives (9% and 7%). Blackstone has also built out a large base of in-house executives, consultants, and advisors who have decades of industry experience and can revitalize a company or property through cost-cutting, acquisitions, or other strategic maneuvers.

With the alternatives industry so heavily weighted toward private equity (56% of industry AUM), and a lot of firms being US-centric, we’ve generally held Blackstone up as the prime example of what we’d like to see from a product diversification perspective, even if the firm could do a bit more, in our view, to expand its non-US operations. More importantly, Blackstone’s diversified revenue streams (based on its fee-earning AUM and geographic reach) have kept its base management fee revenue and fee-related earnings fairly stable as they have expanded over the years. On top of that, the company is currently earning 50% more in fee-related revenue and earnings than each of its three largest peers—Brookfield Asset Management, Apollo Global Management, and KKR & Company.

With customer demand for alternatives expected to stay elevated and investors in alternative assets looking to limit the number of providers they use, large-scale players like Blackstone are advantaged, not only when it comes to fundraising but during deployments and realizations. While activity levels for these three activities have been muted since 2022 (when the Federal Reserve started raising short-term rates), Blackstone did pick up $148.5 billion in new assets through fundraising during 2023, $171.5 billion in 2024, and $167.9 billion so far in 2025, speaking to the firm’s ability to raise capital even in more difficult market environments.

Read more about Blackstone here.

Cohen & Steers

• Morningstar Price/Fair Value: 0.79
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 4.16%
• Industry: Asset Management

Cohen & Steers is a niche asset manager concentrating on real estate securities. Cohen & Steers is an affordable financial-services stock, trading at a 21% discount to our fair value estimate of $75 per share. The asset-management firm earns a narrow economic moat rating.

A combination of rising interest rates, equity and credit market headwinds, and increased competition from private real estate investment vehicles offered by alternative asset managers and other traditional asset managers has had (and is likely to continue to have) an adverse effect on Cohen & Steers’ level of managed assets. The firm ended September 2025 with $90.9 billion in managed assets, down 1.0% year over year and 14.8% below peak levels of $106.6 billion at the end of December 2021.

Market losses have had less of an impact on assets under management than outflows since the start of 2022, with Cohen & Steers experiencing a 1.2% decline in managed assets due to market-related losses over the past 15 calendar quarters. This was better market-related performance than was reported for core REIT-specific benchmarks—the FTSE Nareit All REITs TR Index (down 9%) and the Morningstar Global Markets REIT TR Index (down 8%)—during the same time frame.

Some of this could be due to the diversification of Cohen & Steers’ portfolio (with 36% of its AUM on average coming from globally listed infrastructure funds, preferred securities, and other investment vehicles since the end of 2021), but overall performance has also been solid, with 96% of total AUM outperforming strategy benchmarks on both a three- and five-year basis at the end of September 2025.

Although this level of outperformance would normally boost flows, fixed-income securities and bond funds have been offering equivalent or higher yields than REITs, with less risk for investors. This contributed to the firm’s average redemption rate rising to 24% of late (compared with 19% on average during 2017-21), while also blunting sales of REIT products.

Competition from private real estate investment vehicles, which are marked to model as opposed to being marked to market like listed REITs, has also been stiff, with these products picking up share in the institutional market and making major headway in the retail-advised channel. Blackstone Real Estate Income Trust, for example, posted annualized returns of 1.8% and 9.5% in the past three and five years, respectively, at the end of September 2025.

Read more about Cohen & Steers here.

Ares Management

• Morningstar Price/Fair Value: 0.81
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: Narrow
• Forward Dividend Yield: 3.09%
• Industry: Asset Management

Ares Management is one of the world’s largest alternative-asset managers, with $595.7 billion in total assets under management, including $367.6 billion in fee-earning AUM, at the end of September 2025. Ares Management is an affordable financial-services stock, trading at a 19% discount to our fair value estimate of $180 per share. The asset-management firm earns a narrow economic moat rating.

Ares Management has built a solid position in the alternative-asset management industry. It relies on its reputation, fairly broad product portfolio, investment performance history, and cadre of dedicated professionals to not only raise capital but also maintain its standing as a go-to firm for institutional and high-net-worth investors looking for exposure to alternative assets. With $595.7 billion in total assets under management, or AUM, including $367.6 billion in fee-earning AUM, at the end of September 2025, Ares is one of the world’s largest stand-alone alternative-asset managers.

The company’s portfolio is fairly diversified across its four main business segments: private credit ($391.5 billion in total AUM and $240.2 billion in fee-earning AUM), private equity ($25.1 billion/$11.8 billion), real estate/real assets ($132.4 billion/$80.5 billion), and other alternatives ($46.7 billion/$35.1 billion). Amid strong customer demand for alternatives, and with investors attempting to limit the number of providers they use, larger-scale players like Ares should have some advantages, particularly in fundraising.

To this effect, Ares has secured a healthy $49.1 billion from fundraising efforts so far this year, leaving the firm on track to raise around $69 billion in new capital in 2025. The firm also deployed $100 billion during the first nine months of the year. Given our concerns about fundraising, deployments, and realizations this year in the light of increased uncertainty regarding economic growth, these were definitely positives to take away from the company’s results.

The firm should benefit from a more normalized fundraising, deployment, and realization activity over time. This is evident in our medium-term estimates for 2025, 2026, and 2027 EPS of $5.04, $6.49, and $7.69, respectively, based on our expectations for after-tax realized income of $1.0 billion, $1.3 billion, and $1.6 billion in those years.

Read more about Ares Management here.

Ally Financial

• Morningstar Price/Fair Value: 0.82
• Morningstar Uncertainty Rating: High
• Morningstar Economic Moat Rating: None
• Forward Dividend Yield: 3.13%
• Industry: Credit Services

Credit-services firm Ally Financial rounds out our list of best financial-services stocks to buy. Formerly the captive financial arm of General Motors, Ally Financial became an independent publicly traded firm in 2014 and is one of the largest consumer auto lenders in the country. The stock is 18% undervalued relative to our fair value estimate of $47 per share.

Ally is the largest indirect auto lender in the US, with the firm acquiring auto loans from tens of thousands of auto dealerships. The bank also offers auto insurance, commercial lending, mortgage finance, and credit cards, though auto loans remain its core focus and largest source of revenue.

Ally has benefited from the growth of online banking as the bank has been able to materially improve its funding structure in a relatively short period of time, with deposits now making up over 88% of total funding from 54% in 2016. Additionally, the quality of its deposit base has improved at the same time, with its more expensive certificates of deposit now making up less than 5% of total deposits. Ally’s net interest income will be a long-term beneficiary of this improvement, and we expect the bank’s net interest margin to continue to recover in 2025 and remain considerably wider than it was before 2020. The firm’s net interest margin will be negatively affected by the sale of its credit card division in 2025, but this will be offset by the steady rolloff of its mortgage loan book.

Ally is beginning to recover from a period of diminished profitability as falling used car prices and weakening consumer credit quality pressured the bank’s credit costs in 2023 and 2024. Used car prices have stabilized in 2025, and the bank’s decision to tighten its underwriting is leading to lower delinquency rates on newer loan vintages. We expect Ally’s credit quality to continue to improve heading into 2026, but loan growth will face headwinds as a result.

In the long term, the benefit of Ally’s improved funding structure and asset mix will lead to wider net interest margins and better returns than the firm has historically delivered. We also like the firm’s decision to exit its smaller lending categories and think the firm will benefit from better focus on its core auto lending business. That said, auto lending will likely remain a highly competitive space, and a significant improvement in market conditions will cause the segment to draw increased attention from other lenders.

Read more about Ally Financial here.

How to Find More of the Best Financial-Services Stocks to Buy

Investors who’d like to extend their search for top financial-services stocks can do the following:

• Review Morningstar’s comprehensive list of financial-services stocks to investigate further.
• Stay up to date on the financial-services sector’s performance, key earnings reports, and more with Morningstar’s financial-services sector page.
• Read Morningstar’s Guide to Stock Investing to learn how our approach to investing can inform your stock-picking process.
• Use the Morningstar Investor screener to build a shortlist of financial-services stocks to research and watch.