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Synchrony (SYF) Down 25.2% in 3 Months: Should You Stay Put?
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Synchrony Financial’s (SYF - Free Report) shares have declined 25.2% in the past three months. In comparison, the industry it belongs to declined 0.1%, the sector fell 3.5% and the S&P 500 depreciated 2.8% during this time frame. Let’s delve deeper to understand whether this fall in SYF stock price is concerning or should you sit tight.
Image Source: Zacks Investment Research
Probable Causes for the Decline
Synchrony Financial offers a wide range of credit products and consumer installment loans for a diverse group of clients. Hence, consumers paying off debt is a growth driver for companies like Synchrony Financial. Due to government assistance, stimulus checks, accumulated savings amid the pandemic and other reasons, consumers were considered to be in a favorable position to pay off their loans. Yet, the rising market volatility is changing the scenario. High inflation, global supply shortage and other factors are affecting consumers, making investors unsure about consumer debts. Also, Russia’s invasion of Ukraine and fear of muted economic growth are expected to impact consumer spending, which in turn can affect credit card issuer SYF.
Beyond the Turmoil
Even though market volatility is putting pressure on the stock, the company is in a strong foothold. The latest Fed rate hike is good for Synchrony Financial’s investment income and there are more rate hikes to come.
The company’s operations are also showing positive signs. Home & Auto period-end loan receivables grew 3.3% year over year for the fourth quarter. Purchase volume improved 12.6% year over year owing to consistent performances. Health & Wellness period-end loan receivables grew 6.9% year over year while purchase volume advanced 14.2%, highlighting broad-based growth across all markets served. Lifestyle period-end loan receivables also improved 7.5% year over year for the fourth quarter, courtesy of power sports and music strength.
Increased purchase volume, new account growth and improving efficiency ratio are indicative of SYF’s strong operations. Its series of acquisitions and renewal of alliances are helping it enhance digital capabilities and diversify the business. The company included 36 partners and renewed 38 relationships with partners in 2021, which will drive its competitive edge. Cost-curbing initiatives are boosting the bottom line. SYF currently has a Zacks Rank #3 (Hold).
Also, considering the forward 12-month price/earnings, the company is undervalued. The stock is currently trading at 6.5X forward earnings, which is below the industry average of 12.14X.
Estimates
SYF’s first-quarter earnings per share estimates have increased 2% in the past 60 days. The consensus mark for revenues for the first quarter indicates a 9.1% year-over-year rise. It beat earnings estimates in each of the last four quarters, with an average of 18.1%.
Headquartered in McLean, VA, Primis Financial has witnessed two upward earnings estimate revisions for 2022 in the past 60 days compared with none in the opposite direction. Primis Financial beat earnings estimates in three of the last four quarters and met once, with an average of 27.8%. The Zacks Consensus Estimate for FRST’s top line for 2022 is pegged at $108.2 million.
Los Angeles, CA-based Oaktree Specialty’s bottom-line estimate for the current year is pegged at 68 cents per share, indicating a rise of 6.3% year over year. In the past 60 days, OCSL has witnessed three upward estimate revisions and no downward movement. Oaktree Specialty beat earnings estimates thrice in the last four quarters and met once, with an average surprise of 12.2%.
Saint Peter Port, Guernsey-based Burford Capital’s bottom-line projection for the current year suggests a surge of 372.7% year over year. BUR has witnessed one upward estimate revision and no downward movement in the past 60 days. The consensus mark for Burford Capital’s top line for the current year indicates a 19.9% rise from the year-ago period.
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Synchrony (SYF) Down 25.2% in 3 Months: Should You Stay Put?
Synchrony Financial’s (SYF - Free Report) shares have declined 25.2% in the past three months. In comparison, the industry it belongs to declined 0.1%, the sector fell 3.5% and the S&P 500 depreciated 2.8% during this time frame. Let’s delve deeper to understand whether this fall in SYF stock price is concerning or should you sit tight.
Image Source: Zacks Investment Research
Probable Causes for the Decline
Synchrony Financial offers a wide range of credit products and consumer installment loans for a diverse group of clients. Hence, consumers paying off debt is a growth driver for companies like Synchrony Financial. Due to government assistance, stimulus checks, accumulated savings amid the pandemic and other reasons, consumers were considered to be in a favorable position to pay off their loans. Yet, the rising market volatility is changing the scenario. High inflation, global supply shortage and other factors are affecting consumers, making investors unsure about consumer debts. Also, Russia’s invasion of Ukraine and fear of muted economic growth are expected to impact consumer spending, which in turn can affect credit card issuer SYF.
Beyond the Turmoil
Even though market volatility is putting pressure on the stock, the company is in a strong foothold. The latest Fed rate hike is good for Synchrony Financial’s investment income and there are more rate hikes to come.
The company’s operations are also showing positive signs. Home & Auto period-end loan receivables grew 3.3% year over year for the fourth quarter. Purchase volume improved 12.6% year over year owing to consistent performances. Health & Wellness period-end loan receivables grew 6.9% year over year while purchase volume advanced 14.2%, highlighting broad-based growth across all markets served. Lifestyle period-end loan receivables also improved 7.5% year over year for the fourth quarter, courtesy of power sports and music strength.
Increased purchase volume, new account growth and improving efficiency ratio are indicative of SYF’s strong operations. Its series of acquisitions and renewal of alliances are helping it enhance digital capabilities and diversify the business. The company included 36 partners and renewed 38 relationships with partners in 2021, which will drive its competitive edge. Cost-curbing initiatives are boosting the bottom line. SYF currently has a Zacks Rank #3 (Hold).
Also, considering the forward 12-month price/earnings, the company is undervalued. The stock is currently trading at 6.5X forward earnings, which is below the industry average of 12.14X.
Estimates
SYF’s first-quarter earnings per share estimates have increased 2% in the past 60 days. The consensus mark for revenues for the first quarter indicates a 9.1% year-over-year rise. It beat earnings estimates in each of the last four quarters, with an average of 18.1%.
Key Picks
Some better-ranked players in the Financial - Miscellaneous Services space include Primis Financial Corp. (FRST - Free Report) , Oaktree Specialty Lending Corporation (OCSL - Free Report) and Burford Capital Limited (BUR - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Headquartered in McLean, VA, Primis Financial has witnessed two upward earnings estimate revisions for 2022 in the past 60 days compared with none in the opposite direction. Primis Financial beat earnings estimates in three of the last four quarters and met once, with an average of 27.8%. The Zacks Consensus Estimate for FRST’s top line for 2022 is pegged at $108.2 million.
Los Angeles, CA-based Oaktree Specialty’s bottom-line estimate for the current year is pegged at 68 cents per share, indicating a rise of 6.3% year over year. In the past 60 days, OCSL has witnessed three upward estimate revisions and no downward movement. Oaktree Specialty beat earnings estimates thrice in the last four quarters and met once, with an average surprise of 12.2%.
Saint Peter Port, Guernsey-based Burford Capital’s bottom-line projection for the current year suggests a surge of 372.7% year over year. BUR has witnessed one upward estimate revision and no downward movement in the past 60 days. The consensus mark for Burford Capital’s top line for the current year indicates a 19.9% rise from the year-ago period.