It seems to be a wise decision to add Ally Financial ALLY stock to your portfolio now, given the company’s efforts to diversify revenues by enhancing digital offerings and introducing new products. Also, restructuring and expansion activities as well as a strong balance sheet position bode well for the future.
Further, analysts are bullish on the stock. The Zacks Consensus Estimate for the company’s earnings has been revised 1.1% and 2% upward over the past 60 days for 2019 and 2020, respectively. As a result, the stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance seems impressive as well. So far this year, the stock has rallied 33.3%.
Ally Financial Inc. Price
Ally Financial Inc. price | Ally Financial Inc. Quote
Why Ally Financial is an Attractive Pick
Earnings growth: Ally Financial witnessed earnings growth of 24% over the past three to five years compared with 3.3% growth of the industry. This momentum is likely to continue in the near term as reflected by the projected earnings per share growth of 8.4% for 2019 and 11.5% for 2020.
Moreover, Ally Financial has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 11%.
Further, the long-term (three-five years) projected earnings growth rate of 14% promises rewards for shareholders.
Revenue strength: Backed by strong originations and retail loan growth, Ally Financial’s revenues witnessed a CAGR of 2% over the last five years (2014-2018). Further, the company has been witnessing a steady improvement in net interest margin over the last several years.
Additionally, as part of its strategy to diversify into banking products, Ally Financial is making efforts to enhance its digital offerings and introduce new products to further boost profitability. Also, the wealth management and online brokerage initiatives related to the credit card offerings are on track.
Its projected sales growth rate of 7.8% for 2019 and 3.4% for 2020 ensures continuation of the upward revenue trend.
Efficient capital deployment plan: Ally Financial is no longer required to take part in annual stress test conducted by the Federal Reserve. Further, it announced authorization to repurchase up to $1.25 billion worth of shares, beginning third-quarter 2019 through the second quarter of 2020. Also, as part of its 2018 capital plan, the company hiked its quarterly dividend twice – 15.4% in July 2018 and 13.3% in January 2019. Given the capital strength and favorable dividend payout ratio, it will likely be able to sustain improved capital deployments.
Stock seems undervalued: With respect to the price/book and PEG ratios, Ally Financial seems undervalued. It has a P/B ratio of 0.87 and a PEG ratio of 0.59, both falling below the respective industry averages of 1.22 and 0.89.
Also, the stock has a Value Score of A. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.
Other Stocks Worth a Look
Navient Corporation NAVI has witnessed an upward earnings estimate revision of 8.6% for the current year, over the past 60 days. Also, its share price has jumped 52% so far this year. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Enova International’s ENVA earnings estimates have been revised 8.4% upward for the current year in the past 60 days. So far this year, Zacks Rank #2 stock, has rallied 18.2%.
Discover Financial Services DFS has recorded an upward earnings estimate revision of 1.7% for the current year in the past 60 days. Its share price has witnessed a 33.2% rise so far this year. The stock carries a Zacks Rank #2.
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