NEW YORK (TheStreet) -- Nelnet (NNI - Get Report) shares are up 10.7% to $43.55 following the announcement of its intent to purchase CIT Group's (CIT - Get Report) Federal Family Education Loan Program for $3.6 billion.
The sale of the lending business includes the transaction of $2.6 billion in student loans and related assets and approximately $950 million of unsecuritized student loans.
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The sale will increase Nelnet's student loan portfolio to over $29 billion.
The deal is expected to close later this month.
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TheStreet Ratings team rates NELNET INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NELNET INC (NNI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and attractive valuation levels. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- NNI's revenue growth has slightly outpaced the industry average of 4.5%. Since the same quarter one year prior, revenues rose by 10.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Consumer Finance industry and the overall market on the basis of return on equity, NELNET INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The company, on the basis of net income growth from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and greatly underperformed compared to the Consumer Finance industry average. The net income increased by 24.5% when compared to the same quarter one year prior, going from $56.63 million to $70.52 million.
- The debt-to-equity ratio is very high at 17.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- You can view the full analysis from the report here: NNI Ratings Report