Although Bread Financial (currently trading at $55.02 per share) has gained 14% over the last six months, it has trailed the S&P 500’s 22.7% return during that period. This might have investors contemplating their next move.

Is there a buying opportunity in Bread Financial, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Do We Think Bread Financial Will Underperform?

We're sitting this one out for now. Here are two reasons there are better opportunities than BFH and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.

Unfortunately, Bread Financial’s 1.4% annualized revenue growth over the last five years was weak. This was below our standards.

2. EPS Growth Has Stalled

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Bread Financial’s flat EPS over the last five years was below its 1.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Bread Financial falls short of our quality standards. With its shares trailing the market in recent months, the stock trades at 7.1× forward P/E (or $55.02 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are more exciting stocks to buy at the moment. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Would Buy Instead of Bread Financial

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