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Synchrony Financial (SYF) Up 56.6% YTD: Further Upside Left?

Synchrony Financial SYF stock has been in investors’ good books on the back of high interest income and strategic growth initiatives.

Its recently reported third-quarter 2019 earnings per share of $1.22 beat the Zacks Consensus Estimate by 8.9%. The bottom line also surged 34% year over year on rising net interest income.

Year to date, this Zacks Rank #3 (Hold) stock has soared 56.6%, outperforming the industry’s growth of 19.2%.

We expect this momentum to continue, banking on the following factors:

The company has been witnessing a solid top line since 2013, riding on improving interest income. This uptick is evident from the 2013-2018 CAGR of 9.7%. In 2019, overall growth can be attributed to the PayPal credit program buyout and loan receivables growth. Synchrony Financial’s investments in CareCredit network expansion and enhancement of its digital capabilities also contributed to the top line. We expect this revenue rise to pave the way for long-term growth.

Several alliances and strategic acquisitions have driven the company’s growth profile. These initiatives aided the company to bolster its digital capabilities as well as diversify its business. For instance, its Pets Best buyout enabled it to boost its CareCredit platform and enter the pet insurance business as a managing general agent. Further, its PayPal Credit acquisition led to significant business development. Extension of agreements, such as those with Suzuki, Bosley and Polaris are expected to enrich its capabilities. All these integrations aim at proliferating the company’s business lines, which in turn, should drive its competitive edge.

The company’s Retail Card platform is a leading provider of private label credit cards and Dual Cards, general purpose co-branded credit cards and small and medium-sized business credit products. The business has been delivering impressive results on the back of volume expansion.

Other Noteworthy Factors

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.  

Also, the company delivered a positive earnings surprise in all the last four quarters, the average being 10.2%.

The Zacks Consensus Estimate for the company’s 2019 and 2020 earnings indicates an improvement of 13.6% and 5.9%, respectively, from the year-ago reported figures.

Stocks to Consider

Investors interested in the finance sector may consider some better-ranked stocks like On Deck Capital, Inc. ONDK, AXA Equitable Holdings, Inc. EQH and Cardtronics PLC CATM. You can see the complete list of today’s Zacks #1 Rank stocks here.

On Deck Capital operates an online platform for small business lending. It pulled off average four-quarter positive surprise of 8.3%. It carries a Zacks Rank #2 (Buy).

AXA Equitable Holdings works as a diversified financial services company. The company came up with average four-quarter beat of 12.4%. It sports a Zacks Rank #1 (Strong Buy).

Cardtronics provides automated consumer financial services and delivered average four-quarter positive surprise of 28.8%. It holds a Zacks Rank of 2.

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