Synchrony Financial (SYF – Free Report) has been in the good books of investors due to its strong portfolio, multiple buyouts and alliances, a successful CareCredit platform, and strong financial position. Other factors contributing to this increase are repeat sales, a suite of advanced digital solutions and cost reduction efforts.
Synchrony Financial carries a Zacks rank #3 (Hold) at present. In 2021, SYF saw approximately 25 million new account creations and a record purchase volume of $166 billion. SYF has a strong portfolio of aligned businesses, which sets it well for growth. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Synchrony Financial’s ROE for the last 12 months is 30.8%, still above the industry average of 22.9%. This reflects SYF’s efficiency in using its shareholders’ funds.
SYF’s earnings have exceeded estimates in each of the past four quarters, averaging 18.08%.
This financial services player is constantly striving to expand its portfolio. In fact, multiple alliances and takeovers have helped the player improve his digital abilities as well as diversify his portfolio. Synchrony Financial also constantly renews several relationships. SYF became the card issuer for the Walgreens co-branded credit card program in the United States. SYF included 36 partners and renewed 38 relationships last year.
In 2021, the purchase volume reached a record high and increased by 19.2% compared to the level at the end of 2020. For the current year, this financial services company expects strong consumer demand paving the way for widespread purchasing volume growth in several industries and markets it serves.
SYF’s CareCredit platform also holds significant growth potential. CareCredit is accepted at over 9,000 Walgreens and Duane Reade stores and over 17,000 pharmacies worldwide. The segment expanded its capabilities with the takeover of Pets Best Insurance. It seeks to provide the same by offering a diverse range of credit cards, commercial credit products and consumer installment loans. Interest income from these products remains SYF’s primary source of income.
That aside, SYF enjoys a stable capital position. Its solvency position is reflected in total liquidity (liquid assets and undrawn credit facilities) of $15.7 billion, which contained $13 billion in liquid assets. The total cash figure was equivalent to 16.4% of total assets. With the strength of its balance sheet, it is also deploying capital to increase shareholder value. SYF returned $3.4 billion in capital in 2021.
SYF also took cost-cutting measures for some time to reduce operating expenses. As a result, he could manage to reduce his expenses by 4.5% and 2.3%, respectively, year-over-year. Synchrony Financial expects quarterly spending to remain in line with fourth quarter 2021 levels.
However, the increase in its loan portfolio remains a concern.
SYF shares have lost 16.2% in a year, more than its industry’s 4.9% decline.
Image source: Zacks Investment Research
Actions to Consider
Some higher ranked stocks in finance are Cantaloupe Inc. (CTLP – free report), WEX inc. (WEX – free report) and Virtu Financial, Inc. (VIRT – free report). While VIRT and CTLP are sporting a Zacks Rank #1 (Strong Buy), WEX is currently sporting a Zacks Rank #2 (Buy).
Cantaloupe is a software and payments company, providing end-to-end technology solutions for the unattended retail market. CTLP came with a four-quarter surprise of 108.3%, on average.
WEX is a leading provider of payment processing and commerce solutions across a wide range of industries including fleet, travel and healthcare. WEX delivered a surprise over the last four quarters of 9.96% on average. Over the past 30 days, the WEX has seen its current year earnings move 0.6% north.
Virtu Financial is a market-leading financial services company that leverages cutting-edge technology to provide execution services and data as well as analytics and connectivity products to its customers, as well as to provide liquidity in global markets. VIRT’s earnings have managed to beat estimates in three of its last four quarters (missing the target in one), averaging 24.76%. Over the past 60 days, VIRT has seen 2022 earnings estimates move 22.4% north.