The past six months have been a windfall for Synchrony Financial’s shareholders. The company’s stock price has jumped 61.8%, hitting $70.90 per share. This was partly due 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 for active Edge members.
Why Is SYF a Good Business?
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. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Synchrony Financial’s EPS grew at an astounding 31.4% compounded annual growth rate over the last five years, higher than its 4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Growing TBVPS Reflects Strong Asset Base
We consider tangible book value per share (TBVPS) an important metric for financial firms. TBVPS represents the real, liquid net worth per share of a company, excluding intangible assets that have debatable value upon liquidation.
Synchrony Financial’s TBVPS increased by 19.1% annually over the last five years, and growth has recently accelerated as TBVPS grew at an incredible 21.7% annual clip over the past two years (from $24.67 to $36.55 per share).
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 bank funding. Banks 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 22.4%, exceptional 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 we're bullish on Synchrony Financial, and after the recent rally, the stock trades at 8× forward P/E (or $70.90 per share). Is now the time to buy despite the apparent froth? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More Than Synchrony Financial
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