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Why Should You Hold Synchrony Financial in Your Portfolio?

Zacks Equity Research

Synchrony Financial SYF is well-poised for growth on the back of consistent revenues and strategic initiatives. The company has an impressive Growth Score of A. This style score analyzes the growth prospects of a company.

Estimates for the company have been revised upward over the past 60 days, instilling the brokers’ confidence in the stock. The stock has seen the Zacks Consensus Estimate of $4.69 for 2020 move 2% north.

The company even flaunts an encouraging earnings surprise history, having outshined the Zacks Consensus Estimate in all the trailing four quarters, the average being 13.83%. This also adds credence to the company’s operational efficiency.

The stock carries an impressive 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 has been witnessing a sturdy uptick in revenues since 2013 on the back of higher interest income, growing at a CAGR of 9.7%. Investments in expanding CareCredit network and boosting digital capabilities have also contributed to its top line. A steady improvement in revenues is primarily favored by the company’s rapidly-growing interest income and its inorganic growth strategies are likely to pave the way for long-term growth.

Synchrony Financial has been making concerted efforts in effecting strategic buyouts to fuel its business growth. Acquisition of Loop Commerce to ramp up digital efficiency, buyout of U.S. PayPal Credit financing program to leverage position, alliance renewals such as with Sam's Club, Qurate Retail Group, Google, eBay, CareCredit network, Amazon et al position are latest endeavors to that end. All these integrations aim at diversifying the company’s business lines that in turn, drive its competitive edge.

The company’s solid retail card platform also deserves a mention. Retail Card interest and fees on loans have been rising over the last several quarters and the platform is likely to continue with this momentum in the near term. This in turn, would aid the company’s top-line growth.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $4.37, representing a year-over-year increase of 16.8% on 0.4% higher revenues of $16.24 billion.

For 2019, the consensus mark for earnings per share stands at $4.69 on $16.7 billion revenues, translating into a respective 7.5% and 2.9% year-over-year increase. The expected long-term earnings growth is pegged at 9%.

Shares of this Zacks Rank #3 (Hold) company have lost nearly 12.7% in a year’s time, narrower than the industry’s decline of 13.8%.

Stocks to Consider

Investors interested in the finance sector can look into some better-ranked stocks like Virtu Financial, Inc. VIRT, Fidelity National Information Services, Inc. FIS and Euronet Worldwide, Inc. EEFT. You can seethe complete list of today’s Zacks #1 Rank stocks here.

Virtu Financial provides market making and liquidity services to the financial markets around the globe. The company sports a Zacks Rank #1 (Strong Buy) and came up with average trailing four-quarter positive surprise of 0.63%.

Fidelity National Information works as a financial services technology company worldwide. It has a Zacks Rank of 1. The company managed to deliver positive results in all the previous four quarters, the average being 2.72%.

Euronet provides payment and transaction processing and distribution solutions worldwide. It carries a Zacks Rank #2 (Buy). The stock pulled off average four-quarter beat of 2.68%.

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