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4 Reasons to Add Ally Financial (ALLY) Stock to Your Portfolio
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Ally Financial’s (ALLY - Free Report) efforts to diversify revenues are expected to continue supporting financials. Its robust capital position suggests that it will be able to continue to enhance shareholder value through efficient capital deployment activities.
Moreover, analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for its 2021 earnings has been revised 1.6% upward over the past 30 days. Thus, Ally Financial currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, shares of the company have gained 86.9% over the past six months compared with the industry’s rise of 62.5%.
Now, let’s check the other factors that make Ally Financial stock an attractive investment option now.
Earnings Growth: The company’s earnings witnessed growth of 9% over the last three to five years. The uptrend is expected to continue in the near term as reflected by the projected earnings growth rate of 48.5% for 2021 and 22.3% for 2022.
Moreover, Ally Financial has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 50.3%.
Revenue Strength: Supported by strong origination volumes and retail loan growth, Ally Financial’s total financing revenues and other interest income (one of the key sources of its revenues) witnessed a compound annual growth rate (“CAGR”) of nearly 1% over the last six years (2015-2020).
While near-zero interest rates are likely to hurt net interest margin growth to some extent in the near term; the company’s efforts to enhance digital offerings and introduce products to further boost profitability will likely aid growth. Also, its wealth management and online brokerage initiatives related to the credit card offerings remain impressive.
Notably, the company’s revenues are projected to grow 8.2% in 2021 and 4.8% in 2022.
Capital Deployment Activities Efficient: Ally Financial’s capital deployment actions are impressive. In January 2020, it announced a dividend hike of 11.8%, which followed two hikes — 13.3% in January 2019 and 15.4% in July 2018. Further, in January 2021, the company announced a share-repurchase plan to buyback $1.6 billion worth of shares. Driven by its capital strength, earnings growth and favorable dividend payout ratio, the company is expected to be able to sustain enhanced capital deployment activities in the future.
Valuation Favorable: With respect to the price/book (P/B) and price/earnings (P/E) ratios, Ally Financial seems undervalued. It has a P/B ratio of 1.16, lower than the industry average of 1.46. Moreover, its P/E (F1) ratio of 10.11 compares favorably with the industry’s 10.24.
Also, the stock has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Companies Worth a Look
Hope Bancorp, Inc. (HOPE - Free Report) has witnessed an upward earnings estimate revision of 26.2% for 2021 over the past 60 days. Its shares have gained 92% over the past six months. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Blackstone Group Inc.’s (BX - Free Report) 2021 earnings estimates have increased 9.7% over the past 60 days. The company’s shares have gained 40.5% over the past six months. At present, it carries a Zacks Rank #2.
The Goldman Sachs Group, Inc. (GS - Free Report) has witnessed an upward earnings estimate revision of 15.6% for the current year over the past 60 days. It currently carries a Zacks Rank of 2. The stock has gained 69.9% over the past six months.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Image: Bigstock
4 Reasons to Add Ally Financial (ALLY) Stock to Your Portfolio
Ally Financial’s (ALLY - Free Report) efforts to diversify revenues are expected to continue supporting financials. Its robust capital position suggests that it will be able to continue to enhance shareholder value through efficient capital deployment activities.
Moreover, analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for its 2021 earnings has been revised 1.6% upward over the past 30 days. Thus, Ally Financial currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, shares of the company have gained 86.9% over the past six months compared with the industry’s rise of 62.5%.
Now, let’s check the other factors that make Ally Financial stock an attractive investment option now.
Earnings Growth: The company’s earnings witnessed growth of 9% over the last three to five years. The uptrend is expected to continue in the near term as reflected by the projected earnings growth rate of 48.5% for 2021 and 22.3% for 2022.
Moreover, Ally Financial has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 50.3%.
Revenue Strength: Supported by strong origination volumes and retail loan growth, Ally Financial’s total financing revenues and other interest income (one of the key sources of its revenues) witnessed a compound annual growth rate (“CAGR”) of nearly 1% over the last six years (2015-2020).
While near-zero interest rates are likely to hurt net interest margin growth to some extent in the near term; the company’s efforts to enhance digital offerings and introduce products to further boost profitability will likely aid growth. Also, its wealth management and online brokerage initiatives related to the credit card offerings remain impressive.
Notably, the company’s revenues are projected to grow 8.2% in 2021 and 4.8% in 2022.
Capital Deployment Activities Efficient: Ally Financial’s capital deployment actions are impressive. In January 2020, it announced a dividend hike of 11.8%, which followed two hikes — 13.3% in January 2019 and 15.4% in July 2018. Further, in January 2021, the company announced a share-repurchase plan to buyback $1.6 billion worth of shares. Driven by its capital strength, earnings growth and favorable dividend payout ratio, the company is expected to be able to sustain enhanced capital deployment activities in the future.
Valuation Favorable: With respect to the price/book (P/B) and price/earnings (P/E) ratios, Ally Financial seems undervalued. It has a P/B ratio of 1.16, lower than the industry average of 1.46. Moreover, its P/E (F1) ratio of 10.11 compares favorably with the industry’s 10.24.
Also, the stock has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Companies Worth a Look
Hope Bancorp, Inc. (HOPE - Free Report) has witnessed an upward earnings estimate revision of 26.2% for 2021 over the past 60 days. Its shares have gained 92% over the past six months. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Blackstone Group Inc.’s (BX - Free Report) 2021 earnings estimates have increased 9.7% over the past 60 days. The company’s shares have gained 40.5% over the past six months. At present, it carries a Zacks Rank #2.
The Goldman Sachs Group, Inc. (GS - Free Report) has witnessed an upward earnings estimate revision of 15.6% for the current year over the past 60 days. It currently carries a Zacks Rank of 2. The stock has gained 69.9% over the past six months.
5G Revolution: 3 Stocks to Make Your Move
With super high data speed, it will make current cell phones obsolete and unlock the full potential of big data, cloud computing, and artificial intelligence. In the next few years this industry is predicted to create 22 million jobs and a stunning $12.3 trillion in revenue.
Today you have an historic chance to pursue almost unimaginable gains like Microsoft, Netflix, and Apple in their early phases. Zacks has released a Special Report that reveals our . . .
Download now. Today the report is FREE >>