Estimates for Synchrony Financial SYF have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings move 2.9% and 0.7% north, respectively over the same time frame.
Shares of this Zacks Rank #2 (Buy) company have lost 16.4%, wider than the industry
's decline of 14.8%.
The company flaunts a favorable 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. It also carries an impressive Value Style Score of A. Our research shows that stocks with a solid Value Style Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investment space.
Synchrony Financial reported third-quarter 2018 earnings per share of 91 cents, surpassing the Zacks Consensus Estimate of 80 cents by 13.7%. The bottom line also surged 30% year over year on the back of sturdy loan receivables growth and purchase volume. In the first nine months of 2018, the company's total interest income rose 6.2% year over year owing to strong loan receivables growth. Retail Card, Payment Solutions and CareCredit segments of the company fared quite well too.
Now, let's focus on some other important factors that make the company an investor favorite.
Strong Performance of the Retail Card Platform: Retail Card segment, the company's strongest segment, 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 a lion's share to the company's total revenue base, primarily on the back of volume growth and an increase in period-end loan receivables. It is expected to witness commendable revenue growth going forward, which in turn, should boost the company's top line in the future.
Stellar Earnings Surprise History: The company boasts an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 12.31%. This in turn, speaks volumes for the company's operational excellence.
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 1.40, lower than the industry average of 1.95.
Top-Line Improvement: The company has been witnessing a strong top line (at four-year CAGR of 9%), which has been riding on the back of high interest income. In the first nine months of 2018, the same rose 6.2% year over year. Synchrony Financial's strategic alliances leading to inorganic growth are likely to pave the way for long-term growth.
Capital Deployment: The company also boasts a strong capital position, which enables it to deploy capital and enhance shareholder's value. Its cash flow from operating activities for the first nine months of 2018 stands at $6.7 billion, up 10.8% year over year. Due to its solid capital position, the company even increased its quarterly common stock dividend by 40% to 21 cents per share and announced share repurchases of up to $2.2 billion in May 2018.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.50, representing a year-over-year increase of 33.59% on 6.73% higher revenues of $16.1 billion.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $4.21 on $16.76 billion revenues, translating into a respective 20.4% and 4.2% year-over-year rise.
Further, the company's long-term (five years) estimated EPS growth rate of 10.4%, which is greater than the industry's earnings growth rate of 9.1%, promises rewards for investors.
Other Stock to Consider
Investors looking for a few other top-ranked stocks in the same sector may also consider On Deck Capital, Inc. ONDK , American Express Company AXP and Euronet Worldwide, Inc. EEFT .
On Deck Capital operates as an online platform for small business lending in the United States, Canada and Australia. It currently sports a Zacks Rank #1 (Strong Buy). The company managed to deliver positive results in three of the trailing four quarters, the average beat being 109.5%. You can see the complete list of today's Zacks #1 Rank stocks here .
American Express provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. The company presently has a Zacks Rank of 2. It pulled off an average trailing four-quarter positive surprise of 4.39%.
Euronet offers payment and transaction processing and distribution solutions to financial institutions, retailers, service providers, and individual consumers worldwide. It came up with an average four-quarter earnings surprise of 0.94%. The stock currently has a Zacks Rank of 1.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Euronet Worldwide, Inc. (EEFT): Free Stock Analysis Report On Deck Capital, Inc. (ONDK): Free Stock Analysis Report Synchrony Financial (SYF): Free Stock Analysis Report American Express Company (AXP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research