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Synchrony Financial (SYF) Up 184.9% in a Year: More Room to Run?

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Synchrony Financial (SYF - Free Report) has been in investors’ good books for quite some time now owing to its wide array of products, strategic initiatives and solid first-quarter results.

Over the past seven days, the company has witnessed its 2021 and 2022 earnings estimates move north 15.9% and 4.2%, respectively. This instills investors' confidence in the stock.

In the past year, shares of this currently Zacks Rank #3 (Hold) company have skyrocketed 184.9%, outperforming its  industry’s growth of 25.1%.



Companies in the same space, such as Jefferies Financial Group Inc. (JEF - Free Report) ,  Moodys Corporation (MCO - Free Report) and Discover Financial Services  (DFS - Free Report) have also soared 162.2%, 32.7% and 214.3%, respectively, in the same time frame. You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

While both Discover Financial and Jefferies Financial sport a Zacks Rank #1 (Strong Buy), Moodys holds a Zacks Rank #2 (Buy), presently.

Recently, the company delivered first-quarter 2021 earnings per share of $1.73, which outpaced the Zacks Consensus Estimate by 15.3%. Further, the bottom line improved 198.3% year over year on the back of lower expenses.

As a leading card issuer, inorganic story has always been one of its key growth trajectories. It frequently resorts to alliances and buyouts to enhance its capabilities and diversify its business profile. The company is actively expanding its collaborations to boost its portfolio.

Synchrony Financial also revised its tie-up0073 with Mattress Firm, Ashley Home furniture, American Eagle, Ashley HomeStore, CITCO, etc. It added 3900 merchants in the first quarter of 2021. It acquired Allegro Credit, a leading provider of point-of-sale consumer financing for audiology products and dental services.

It’s needless to say that additional financing options aid people in taking informed and faster decisions about choosing treatment options per the needs of their families.

The company made restructuring plans to reduce its operating expenses and invested $89 million in the third quarter of 2020. In 2020, it managed to decrease 4.5% of its costs year over year on the back of lower purchase volume, controlled employee costs, etc. The initiative is expected to trim expenses by around $210 million during 2021. It even estimates higher cost savings from this plan after 2021.

Retail Card is a leading provider of private label credit cards and Dual Cards, general purpose co-branded credit cards, and small and medium-sized business credit products. Retail Card interest and fees on loans has been rising over the past many years on purchase volume growth and increased period-end loan receivables increase. The segment benefited from spending on essential items like grocery, supplies, etc.

The company’s CareCredit platform also holds ample growth potential. It is focused on expanding this business with attention paid to the health systems. CareCredit is accepted at more than 9,000 Walgreens and Duane Reade stores, and at more than 17000 pharmacies across the globe. The segment undoubtedly expanded the company’s capabilities with the acquisition of Pets Best insurance.

This apart, its solvency position remains impressive. As of Mar 31, 2021, it had cash and cash equivalents worth $16.2 billion, higher than its borrowings of $15.1 billion. The company’s balance sheet was consistently strong during the reported quarter with total liquidity of $28 billion (liquid assets and undrawn credit facilities) accounting for 29.2% of its total assets. Its net debt to capital stands at -5.1%, lower than the industry's average of 8%.

Further Upside Left?

We believe that the company is well-poised for growth on the back of various strategic actions.

The stock carries an impressive  VGM Score  of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all three factors.
 
The Zacks Consensus Estimate for the company’s 2021 earnings indicates an improvement of 147.6% from the year-ago reported figure.

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