Axos Financial: A Compelling Buy Amid Robust Earnings and Strategic Buybacks

In an era of economic uncertainty, Axos Financial (NYSE:AX) has emerged as a standout performer, driven by sustained earnings growth, disciplined capital management, and a fortress-like balance sheet. With strategic stock repurchases and a favorable regulatory backdrop, Axos presents a compelling opportunity for investors seeking resilience and upside in the financial sector. Let's unpack the key factors fueling its appeal.

Earnings Growth: A Foundation of Strength

Axos has delivered consistent top- and bottom-line momentum, even amid volatile macro conditions. In Q2 2025, diluted EPS reached $1.80, while adjusted EPS (excluding one-time items) surged 13.8% year-over-year to $1.82, signaling strong core performance. The net interest margin (NIM) expanded to 4.83%, up from 4.55% in Q2 2024, driven by disciplined asset-liability management and robust loan growth.

While Axos's stock price has faced near-term volatility, its adjusted EPS trajectory paints a clearer picture of long-term value. Analysts project 4.8% annualized EPS growth for 2025, underpinned by loan growth of 14.5% year-over-year in commercial and industrial sectors and single-family mortgages. This growth is further bolstered by Axos's $23.7 billion total assets, a 3.7% quarterly increase, reflecting solid deposit retention and lending pipelines.

Strategic Buybacks: Amplifying Shareholder Value

Axos's $100 million stock repurchase expansion in May 2025 underscores its confidence in its valuation and future cash flows. With $148 million remaining under its repurchase program, Axos is aggressively reducing shares outstanding, a move that directly lifts per-share metrics.

In Q3 2025 alone, Axos repurchased $28 million of its stock, while an additional $30 million was repurchased in April 2025. This $58 million of buybacks in six months translates to meaningful EPS accretion, especially as the company's efficiency ratio improved to 40.95%, signaling better cost control. With a book value per share of $45.79—up 19% year-over-year—investors can expect further upside as buybacks continue.

A Favorable Regulatory Environment

Axos operates with rock-solid capital ratios, a critical advantage in today's regulatory landscape. Its total capital to risk-weighted assets ratio sits at 15.23%, well above the 10.5% minimum for well-capitalized institutions. This buffer not only insulates Axos from regulatory scrutiny but also positions it to capitalize on lending opportunities in a tightening credit market.

Moreover, Axos's non-performing assets (NPAs) have trended downward, dropping to 0.79% of total assets in Q3 2025, reflecting prudent underwriting practices. While provisions for credit losses rose to $14.5 million due to macroeconomic headwinds, management has shown discipline in balancing growth with risk, ensuring Axos remains a safe haven in volatile times.

Investment Thesis and Risks

Why Buy Axos Now?
- Valuation: Axos trades at a P/E ratio of 12.4x—a discount to its five-year average of 14.7x—and 1.2x book value, offering room for re-rating as earnings stabilize.
- Catalysts: Upcoming Q4 2025 results (though not yet reported) are expected to reflect sustained loan growth and margin resilience, while buybacks will continue to shrink the share count.
- Dividend Stability: Axos's dividend yield of 1.8% is modest but safe, given its strong capital generation.

Risks to Consider:
- Interest Rate Sensitivity: Axos's NIM could face headwinds if deposit costs rise faster than loan yields.
- Economic Downturn: A slowdown in commercial lending or real estate markets could pressure credit quality.

Final Take: Axos Is a Buy

Axos Financial's robust earnings trajectory, aggressive buybacks, and fortress balance sheet make it a standout in the financial sector. With a 4.8% EPS growth forecast and a valuation that lags its fundamentals, Axos is primed for a rebound. Investors seeking a defensive yet growth-oriented financial stock should consider accumulating shares at current levels.

Recommendation: Buy AX for a 12-month target of $79, reflecting 14x the 2025 EPS estimate. Monitor closely for Q4 earnings and macro developments.

This analysis is for informational purposes only. Always conduct your own research or consult a financial advisor before making investment decisions.