6 Reasons Consider Adding Synchrony Financial To Your Portfolio

Estimates for Synchrony Financial SYF have been revised upward over the past 30 days, reflecting analysts' optimism on the stock, and the company flaunts a Zacks 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.

The company reported third-quarter 2018 earnings per share of 91 cents, surpassing the Zacks Consensus Estimate of 80 cents by 13.7 percent. The bottom line also surged 30 percent annually 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 percent 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 percent. 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 percent), which has been riding on the back of high interest income. In the first nine months of 2018, the same rose 6.2 percent 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 percent year-over-year. Due to its solid capital position, the company even increased its quarterly common stock dividend by 40 percent 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 percent on 6.73 percent 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 percent and 4.2 percent annual rise.

All all this in mind, investors should consider Synchrony Financial to give their portfolios a boost.  Of course, each investor should do their own due dilligence before deciding whether to make any trade.

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