NEWT

NewtekOne ($NEWT) Chairman's $1M Share Buying Spree Continues as Q1 Revenue Surges 94% Despite 5x P/E 'Deep Value' Trading

05/29/2025 17:27

Executive confidence in NewtekOne Inc ($NEWT) is reaching extraordinary levels, with Chairman Barry Sloane and other key insiders conducting aggressive share purchases that signal strong conviction in the small-cap financial services company's prospects. Sloane's buying spree has been particularly noteworthy. In just the past few weeks, he purchased 10,000 shares on May 29 ($108,692), another 10,000 shares on May 19 ($112,361), and 10,000 shares on May 13 ($116,220), all executed under 10b5-1 trading plans. These recent purchases follow an even more dramatic transaction in September 2024, when Sloane acquired 40,134 shares in a single purchase worth $472,403. In total, from June 2024 through May 2025, Sloane has purchased over 80,000 shares with a combined value exceeding $1 million. The insider buying extends well beyond the chairman. Director Richard Salute purchased 5,000 shares ($55,285) on May 12, while Director Gregory Zink bought 2,000 shares ($20,780) on May 9. EVP Frank DeMaria added 500 shares ($5,610) on May 16, creating a cluster buying pattern that demonstrates broad management confidence in the company's trajectory. **This aggressive insider activity comes against the backdrop of NewtekOne's robust business fundamentals.** NewtekOne operates as a unique financial services company headquartered in Boca Raton, Florida. Founded in 1998, the company serves as the bank holding company for Newtek Bank, National Association, delivering an integrated financial services platform specifically tailored for small and medium-sized businesses (SMBs). Its distinctive business model combines traditional banking with fintech-enabled services, including SBA lending, payment processing, payroll services, insurance brokerage, and technology solutions. The company's recent financial performance has been exceptionally strong. Q1 2025 adjusted EPS of $0.35 slightly declined from the prior year's $0.38 but met analyst expectations. More impressively, revenue surged 94.1% to $113.12 million, significantly exceeding the $63.22 million forecast. For the full year 2024, revenue grew 25% to $338.7 million while net income increased 7.4% to $49.3 million. NewtekOne's core SBA lending business continues to demonstrate strength. In Q1 2025 alone, the company originated $213 million in SBA 7(a) loans and $68.5 million in Alternative Loan Program (ALP) loans. Management projects approximately $1 billion in SBA 7(a) loans, $250 million in SBA 504 loans, and $500 million in ALP loans for the full year 2025, totaling nearly $1.9 billion in loan originations. Deposit growth has been equally impressive. Newtek Bank's deposits surpassed $1 billion by the end of 2024, nearly doubling year-over-year. Commercial deposits increased 12% quarter-over-quarter, while core consumer deposits grew 2%. **Despite these strong fundamentals, the stock trades at a significant discount, explaining the motivation behind insider purchases.** Currently trading around $10.86, $NEWT shares have declined substantially from their 52-week high of $15.49. This represents a TTM P/E ratio of just 5.70x and a forward P/E of 4.83x, dramatically below the 12-15x industry average for regional banks. The price-to-book ratio of 1.05x also trades below the typical 1.2-1.5x industry range. Conversely, the dividend yield of 7.00% nearly doubles the 3-4% industry average, providing attractive income potential. Profitability metrics remain robust, with ROE at 18.18% (TTM) and ROA at 5.83% (TTM). The efficiency ratio improved from 70.6% to 62.1% year-over-year, demonstrating enhanced cost management. Cash holdings of approximately $270 million provide ample liquidity. Industry tailwinds are also favorable. Growing expectations for interest rate cuts are increasing interest in financial stocks, and NewtekOne's specialized focus on SMB lending positions it well for economic recovery. Management forecasts full-year 2025 EPS of $2.10-$2.50, representing approximately 17% growth. Recent strategic initiatives further strengthen the investment case. The company terminated three office leases to reduce annual expenses by $2 million, appointed Peter Downs as Newtek Bank President, and named Frank M. DeMaria as NewtekOne CFO to enhance management depth. **However, investors should consider several risk factors.** The debt-to-equity ratio of 258% is elevated, and levered free cash flow of -$401 million (TTM) remains negative. Revenue is projected to decline at an average annual rate of 3.3% over the next two years, contrasting with the 6.3% industry growth forecast. The beta of 1.32 indicates above-market volatility. Nevertheless, the massive insider buying sends a powerful signal. Sloane's consecutive large purchases, in particular, demonstrate extraordinary confidence in the company's long-term value creation potential. When executives deploy their own capital to purchase shares, it typically indicates access to positive non-public information or strong conviction in future performance. $NEWT appears positioned as an undervalued opportunity with solid fundamentals backed by exceptional management confidence, enhanced by an attractive dividend yield.

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