Synchrony Financial’s 18.8% return over the past six months has outpaced the S&P 500 by 5.1%, and its stock price has climbed to $76.06 per share. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is it too late to buy SYF? Find out in our full research report, it’s free.
Why Are We Positive on Synchrony Financial?
Powering over 73 million active accounts and partnerships with major brands like Amazon, PayPal, and Lowe's, Synchrony Financial (NYSE: SYF) provides credit cards, installment loans, and banking products through partnerships with retailers, healthcare providers, and digital platforms.
1. EPS Moving Up Steadily
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Synchrony Financial’s EPS grew at 11.6% compounded annual growth rate over the last five years, higher than its 7.7% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Steady Increase in TBVPS Highlights Solid Asset Growth
Tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
Synchrony Financial’s TBVPS increased by 14.5% annually over the last five years, and although its annualized growth has recently decelerated a bit to 11.6% over the last two years (from $31.05 to $38.67 per share), we still think its performance was solid.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of financial firm funding. Financial firms maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Synchrony Financial has averaged an ROE of 21.5%, excellent for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Synchrony Financial has a strong competitive moat.
Final Judgment
These are just a few reasons why Synchrony Financial ranks highly on our list, and with its shares beating the market recently, the stock trades at 7.9× forward P/E (or $76.06 per share). Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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