Estimates for Synchrony Financial (SYF - Free Report) have been revised upward over the past 30 days, reflecting the brokers’ confidence in the stock. The stock has seen the Zacks Consensus Estimate of $3.37 for 2018 being moved north by 0.6%.
Synchrony Financial, a consumer financial service providing company in the United States, offers private label credit cards, dual cards, small and medium-sized business credit products, private label credit cards, installment loans, etc. Shares of this Zacks Rank #3 (Hold) company have rallied 26.5% in a year’s time, outperforming the industry’s growth of 13.9%.
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.
Now let’s focus on the aspects that make Synchrony Financial an investor favorite stock.
Increasing Topline: Synchrony Financial has been witnessing strong revenue growth (four-year CAGR of 9%), riding on the strength of rising interest income and registering a four-year CAGR of 2.6%. Rapidly-growing interest income and inorganic growth strategies are likely to pave the way for long-term growth.
Also,Synchrony Financial’s strategic alliances have led to solid inorganic business growth. These collaborations helped diversifying the company’s business lines, thus sharpening its competitive edge.
Strong Performance of the Retail Card Platform: Retail Card is a top provider of private label credit cards and Dual cards, general purpose co-branded credit cards and small and medium-sized business credit products. This segment contributes the lion’s share to the company’s total revenues. Backed by significant volume growth as well as a period-end loan receivables increase, this segment is expected to witness strong revenue growth and boost the company’s top line in the future.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.37, representing a year-over-year increase of 28.6% on 8.7% higher revenues of $16.4 billion.
For 2019, the consensus estimate for earnings per share stands at $4.09 on $18 billion revenues, translating into a respective 21.2% and 10.1% year-over-year rise.
Underpriced: Looking at the company’s price-to-earnings ratios, shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 10.06, falling below the industry average of 12.50.
Positive Earnings Surprise History: The company flaunts an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in all the trailing four quarters with an average beat of 9.46%. This shows the company’s operational excellence.
Improving Return on Equity: Synchrony Financial’s return on equity has been expanding over the past many years, outperforming the industry average. Return on equity is a profitability measure, identifying the company’s effective utilization of its shareholders’ fund.
Stocks to Consider
Some better-ranked stocks are Virtu Financial, Inc. (VIRT - Free Report) , SLM Corporation (SLM - Free Report) and Encore Capital Group Inc (ECPG - Free Report) . You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Virtu Financial, Inc. and its subsidiaries offer market making and liquidity services to the financial markets across the globe. It pulled off an average four-quarter positive earnings surprise of 26.13%.
SLM Corporation works as a saving, planning and paying for college company in the United States. It delivered an average four-quarter beat of 3.13%.
Encore Capital Group, Inc. provides debt recovery and other related solutions to consumers across a range of financial assets. The company came up with an average four-quarter positive surprise of 10.13%.
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