It seems to be a wise decision to add Ally Financial Inc. (ALLY - Free Report) stock to your portfolio now, given the company’s efforts to diversify revenues by enhancing digital offerings and introducing new products. Also, the company’s restructuring and expansion activities bode well for the future.
The company’s price performance seems impressive as well. Over the past year, its shares have gained 31.7%, outperforming 3.5% growth of the industry it belongs to.
Moreover, its Zacks Consensus Estimate for the current-year earnings has been revised marginally upward over the last 30 days, indicating analysts’ optimism about its earnings growth potential. As a result, the stock currently carries a Zacks Rank #2 (Buy).
Given the positive estimate revisions and a solid Zacks Rank, we expect the stock to gain in the near term.
Here are some other factors that make the stock a viable investment option.
Revenue Strength: Backed by strong originations and retail loan growth, Ally Financial’s revenues witnessed a CAGR of 17.4% over the last six years (2012-2017). Moreover, its projected sales growth of 3.9% for 2018 and 4.3% for 2019 ensures continuation of the upward revenue trend.
Earnings Per Share (EPS) Growth: Ally Financial witnessed EPS growth of 53.9% over the last three to five years compared with 0.9% decline of the industry. This earnings momentum is likely to continue in the near term as reflected by the projected earnings per share growth of 26.8% for 2018 and 14.7% for 2019.
Further, the long-term (three-five years) projected EPS growth of 12.7%, higher than the industry average of 11.4%, promises reward for shareholders.
Efficient Capital Deployment Plan: Ally Financial has significantly improved its balance sheet and fundamentals. Its 2017 capital plan (approved by the Fed) includes a dividend hike and $760 million share repurchase authorization. Given the capital strength and favorable dividend payout ratio, the company should be able to sustain improved capital deployments.
Stock Seems Undervalued: With respect to the price/book and price/earnings ratios, Ally Financial seems undervalued. It has a P/B ratio of 0.9 and a P/E (F1) ratio of 9.5, both falling below the respective industry averages of 1.5 and 10.2. Also, the stock has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.
Other Stocks Worth a Look
Some other stocks worth considering in the finance industry are Encore Capital Group, Inc. (ECPG - Free Report) , Enova International, Inc. (ENVA - Free Report) and Enterprise Financial Services Corp (EFSC - Free Report) . All three stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Encore Capital has witnessed an upward earnings estimate revision of 10.4% for the current year, over the past 60 days. Also, its share price rallied 43.7 % over the past year.
Enova International’s earnings estimates have been revised 15.2% upward for the current year in the past 60 days. Over the past year, its share price increased 62.3%.
Enterprise Financial recorded an upward earnings estimate revision of nearly 13.1% for the current year in the past 60 days. Its share price witnessed a 13.5% rise over the past year.
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