In this article, we examine the 11 Most Undervalued Financial Stocks to Buy According to Wall Street Analysts.
So far in 2025, the US banking and financial sector has been the target of interest rate volatility, regulatory headwinds, and uneven credit conditions. And yet, the KBW Nasdaq Bank Index (tracking US banks) is up 17.87% year-to-date (as of October 1). But despite this gain, valuation multiples across many financial names are depressed relative to historical norms. This leaves scope for re-rating if macro conditions stabilize.
And re-rating will happen, according to expert observers. Morgan Stanley, for instance, stated in an analysis that the US financial industry expects the second half of 2025 to be calmer, especially after the “jolt” from President Trump’s “Liberation Day” announcement in April wears off. Companies “see strength in consumer spending, a favorable interest rate environment, and potential upside from regulatory reframing and artificial intelligence,” the analysis states.
Anshul Sehgal, global co-head of Fixed Income, Currency & Commodities within Goldman Sachs Global Banking and Markets division, takes a similar position. He stated in a July 31 podcast that early in Q4, there will be another leg higher in capital expenditures due to deregulation, “especially in the banking industry.” Put simply, Sehgal expects increased activity and potential benefits for financial stocks linked to the coming regulatory changes.
What this means is that there is a gap between sector fundamentals and market pricing for certain financial stocks. And that several banks, insurers, and asset managers may be poised for substantial upside. With this backdrop, this article highlights 11 financial stocks Wall Street sees as trading below intrinsic value.
Photo by Robb Miller on Unsplash
Our Methodology
To identify the 11 Most Undervalued Financial Stocks to Buy According to Wall Street Analysts, we used the Finviz stock screener to compile an initial list of financial sector companies trading at a forward P/E ratio below 15 as of October 1, 2025. We then narrowed down the selection with analyst-estimated upside potential of more than 20% as of October 1, 2025. We also incorporated hedge fund sentiment data from Insider Monkey’s database of Q2 2025 13F filings to assess institutional interest in each stock. The final list is ranked in ascending order based on upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is straightforward: our research has demonstrated that we can outperform the market by replicating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Most Undervalued Financial Stocks to Buy According to Wall Street Analysts
11. NewtekOne, Inc. (NASDAQ:NEWT)
Upside Potential: 24.45%
Forward P/E: 5.34
Number of Hedge Fund Holders: 14
NewtekOne, Inc. (NASDAQ:NEWT) is one of the most undervalued financial stocks to buy according to Wall Street analysts. On September 30, the company’s wholly-owned subsidiary, Newtek Merchant Solutions (NMS), secured a $90 million term loan facility and a $5 million revolving line of credit from Private Credit at Goldman Sachs Alternatives. The financing agreement was used in part to fully repay approximately $30 million of NMS’s outstanding term debt with another lender and to close out that lender’s $10 million undrawn line of credit.
The remaining funds are intended for general corporate purposes. The statement said the funds may be used to provide loans to NewtekOne, repay and reduce outstanding unsecured senior debt, and support company growth initiatives.
Barry Sloane, NewtekOne’s Chairman, President, and CEO, stated that they “appreciate Goldman Sachs Alternatives for being a great, long-term financing partner.”
NewtekOne, Inc. (NASDAQ:NEWT) is a financial holding company. It operates Newtek Bank, N.A. and provides small- and medium-sized businesses with services including SBA 7(a) lending, commercial real estate financing, electronic payment processing, payroll solutions, and insurance products.
10. PayPal Holdings, Inc. (NASDAQ:PYPL)
Upside Potential: 26.54%
Forward P/E: 11.60
Number of Hedge Fund Holders: 89
PayPal Holdings, Inc. (NASDAQ:PYPL) is one of the most undervalued financial stocks to buy according to Wall Street analysts. On September 25, PayPal partnered with decentralized finance platform Spark to expand on-chain liquidity, aiming to grow PYUSD deposits from $100 million to $1 billion.
PYUSD, a U.S. dollar-pegged stablecoin issued by Paxos, is now integrated into SparkLend, enabling users to supply and borrow the asset with support from Spark’s $8 billion stablecoin reserve. This model offers predictable liquidity without relying on costly market-maker incentives, positioning PYUSD for rapid scaling.
The collaboration arrives amid a surge in stablecoin activity, with global supply rising by $30 billion to $263 billion and daily volumes exceeding $100 billion. Spark, which previously deployed $630 million in Bitcoin-backed loans to Coinbase, plays a key role in advancing PYUSD’s adoption. PayPal and Spark see this initiative as a blueprint for leveraging DeFi to establish stablecoins as foundational assets in the evolving financial ecosystem.
PayPal Holdings, Inc. (NASDAQ:PYPL) is a digital payments company. It operates a global two-sided network that enables consumers and merchants to send, receive, and process payments through platforms such as PayPal, Venmo, Braintree, Xoom, and Honey. The company’s services include online checkout, peer-to-peer transfers, merchant payment processing, and digital wallets.
9. Virtu Financial, Inc. (NYSE:VIRT)
Upside Potential: 29.18%
Forward P/E: 8.62
Number of Hedge Fund Holders: 33
Virtu Financial, Inc. (NYSE:VIRT) is one of the most undervalued financial stocks to buy according to Wall Street analysts. On September 11, Jefferies cut its price target for Virtu Financial from $51 to $49 while maintaining its “Buy” rating on the stock. The firm stated that the decision was due to its updated adjusted earnings estimate for Q3 2025, which was cut from $1.02 per share to $0.83 per share.
Jefferies attributed the downgraded earnings forecast to the normalization of market volatility. Specifically, the average level of the VIX index (which measures broader market volatility) is trending 31% lower than the previous quarter. The firm specifically flagged that August 2025’s intraday volatility was about half the level observed in Q2 2025.
Nonetheless, Jefferies considers Virtu to be undervalued. The analysts stated that despite reduced volatility, retail trading engagement remains relatively positive, which supports Virtu’s core revenue streams. They maintained conviction in Virtu’s business model and profitability, referencing its ability to generate strong financial results even during periods of lower volatility.
Virtu Financial, Inc. (NYSE:VIRT) is a financial services company. It leverages proprietary technology to provide market-making, execution services, and multi-asset analytics across global equities, fixed income, currencies, commodities, options, futures, and cryptocurrencies.
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