Growing Navient Corp.'s revenue streams to improve returns is a better use of capital right now than repurchasing shares, according to the company's top executive.
During a conference call, CEO John Remondi defended the company's strategy, including its recent announcement that it will acquire financial technology company Earnest and step up loan originations while dialing back share repurchases.
Navient shares were trading at about $12 on Oct. 18, and Remondi said the company's intrinsic value would be better reflected in the mid-$20s. Broadening revenue streams should eventually improve the stock valuation, he said during a conference call to discuss third-quarter earnings.
Remondi said the company has been using its capital to invest in "high-returns activities." The company had been doing that mainly by purchasing legacy loan portfolios, from which Navient expects to generate cash flow at a discount. The company has also been building up its fee-based business and is now looking to generate assets, Remondi said in response to questions from Omega Advisors founder Leon Cooperman. The well-known investor criticized Navient's buyback suspension and suggested the company go into runoff.
While shareholders value the company, attracting new stock buyers and getting paid fairly has been challenging, Remondi said. Navient has held onto its intrinsic value, and building fee-based businesses can add to it, he said.
"We are equally frustrated with the stock price, and we're working hard to invest in business activities and franchises that will hopefully get that share price ... fully reflective of the value that we think is there," Remondi said.