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It seems to be a wise decision to add Ally Financial Inc. ALLY stock to your portfolio now, given the company’s efforts to diversify revenues by enhancing digital offerings and introducing new products. Also, its restructuring and expansion activities bode well for the future.
Further, analysts are bullish on the stock. The Zacks Consensus Estimate for the company’s earnings has been revised 3% and 2.6% upward over the last 30 days for 2018 and 2019, respectively. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.
The company’s price performance seems impressive as well. Over the past year, the stock has gained 21.2%, outperforming 12.6% growth of the industry it belongs to.
Here are some fundamental factors that make the stock a viable investment option.
Revenue strength: Backed by strong originations and retail loan growth, Ally Financial’s revenues witnessed a CAGR of 17.4% over the last six years (2012-2017). Further, the company has been witnessing a steady improvement in net interest margin over the last several years. Its projected sales growth rate of 2.3% for 2018 and 7.1% for 2019 ensures continuation of the upward revenue trend.
Earnings growth: Ally Financial witnessed earnings growth of 46.1% over the last three to five years against1.3% decline of the industry. This earnings momentum is likely to continue in the near term as reflected by the projected earnings per share growth of 28.9% for 2018 and 14.4% for 2019.
Further, the long-term (three-five years) projected earnings growth rate of 12.7% promises rewards for shareholders.
Efficient capital deployment plan: Ally Financial has significantly improved its balance sheet and fundamentals. The company’s 2018 capital plan (approved by the Federal Reserve) included a 15.4% dividend hike and $1-billion share repurchase authorization. Given the capital strength and favorable dividend payout ratio, the company will likely be able to sustain improved capital deployments.
Stock seems undervalued: With respect to the price/book and price/earnings ratios, Ally Financial seems undervalued. It has a P/B ratio of 0.88 and a P/E (F1) ratio of 8.92, both falling below the respective industry averages of 1.56 and 10.78.
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
Some other stocks worth considering in the same space are Credit Acceptance Corporation CACC, Enova International, Inc. ENVA and Santander Consumer USA Holdings Inc. SC. All three stocks sport a Zacks Rank #1.
Credit Acceptance Corporation has witnessed an upward earnings estimate revision of 6.9% for the current year, over the past 60 days. Also, its share price has jumped 72% over the past year.
Enova International’s earnings estimates have been revised 2.5% upward for the current year in the past 60 days. Over the past year, its share price has surged 209.1%.
Santander Consumer USA recorded an upward earnings estimate revision of nearly 13.2% for the current year in the past 60 days. Its share price has witnessed a 56.1% rise over the past year.
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Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
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