Back to top

Image: Bigstock

Synchrony Financial Rides on Buyouts, Rising Costs a Woe

Read MoreHide Full Article

Synchrony Financial’s (SYF - Free Report) solid organic and inorganic strategies backed by strong financial health, position it well for long-term growth.  The company’s top line has displayed solid growth over the past three years driven by its rapidly growing interest income as well as inorganic growth strategies.

The company’s substantial inorganic growth since 2013 is worth a mention. Its CareCredit unit acquired the Citi Health Card portfolio to further expand its healthcare acceptance network in the United States. The buyout of GPShopper also created new mobile solutions for Synchrony Financial’s retail partners.

CareCredit has been significantly contributing to the company’s growth. As a leading provider of promotional financing to consumers for health and personal care procedures, products or services, this unit has seen consistent increase in interest and fees on loans which favored the company’s overall top-line growth.

Synchrony Financial’s continuous investment in technology has not only upgraded its offerings but has also helped it establish a strong position in the market.

Its consistent cash flow generation supports capital deployment activities. Apart from buyouts, the company has been deploying capital through share buybacks and dividend payments in order to enhance shareholders’ value.

Quarter to date, shares of Synchrony Financial have gained nearly 25% whereas the Zacks Financial- Miscellaneous Services industry has rallied 6%.

However, the company has been witnessing a steep rise in its expenses since 2013, the year of its inception. The rising costs put pressure on its bottom line.

In addition, increasing allowance for loan losses and rising fraud related loss also continues to hurt its profitability.

Zacks Rank & Stocks to Consider

Synchrony Financial presently carries a Zacks Rank #3 (Hold).

Investors interested in the same space can consider some better-ranked stocks like Green Dot Corporation (GDOT - Free Report) , Western Union Company (WU - Free Report) and Total System Services, Inc. . All of these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Green Dot delivered positive surprises in each of the last four quarters, with an average beat of 27%.

Western Union delivered positive surprises in three of the last four quarters, with an average beat of 9.1%.

Total System delivered positive surprises in each of the last four quarters, with an average beat of 5.7%.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>

Published in