Bread Financial Holdings, Inc. BFH has been trading above its 50-day simple moving average (SMA), signaling a short-term bullish trend. Its share price, as of Jan. 21, 2025, was $63.75, down 4.4% from its 52-week high of $66.71.

The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend.

With a market capitalization of $3.16 billion, BFH is set to gain from solid credit sales, proactive risk management, financial flexibility, prudent capital deployment and higher return on capital.

BFH Trading Above 50-Day Moving Average

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BFH is an Outperformer

Shares of Bread Financial have surged 107.3% in the past year, outperforming its industry, the Finance sector and the Zacks S&P 500 composite’s growth of 22.7%, 25% and 24.3%, respectively.

BFH Outperformed Industry, Sector and S&P 500 in 1 Year

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BFH Shares are Affordable

BFH shares are trading at a discount to the Zacks Financial Transaction Services industry. Its forward price-to-earnings of 9.64X is lower than the industry average of 16.16X. It has a Value Score of A.

Shares of Virtu Financial, Inc. VIRT are trading at a discount to the industry average, while American Express Company AXP and LendingClub Corporation LC shares are trading at a multiple higher than the industry average.

Optimistic Analyst Sentiment on BFH

Three of the seven analysts covering the stock have raised estimates for 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2025 moved 0.7% north in the last 30 days.

BFH’s Return on Capital

The return on invested capital in the trailing 12-months was 10%, better than the industry average of 4.9%, reflecting the company’s efficiency in utilizing funds to generate income.

Factors Acting in Favor of BFH

The credit sales performance is expected to improve on the back of solid consumer spending. With the continued growth of credit sales, average loans are likely to increase. With new partner additions and holiday spending, BFH continues to expect strong credit sales.

Credit metrics should remain strong with delinquency and net loss rates remaining below the historical averages. Given disciplined, proactive risk management and strong consumer payment behavior, net loss rates are expected to remain low.

BFH is prudently investing in strategic growth areas and ramping up marketing spending in growth verticals and digital innovation and technology enhancements. Bread Financial stated that ramping up its digital and technology capabilities remains a top priority this year. It has strategic relationships leveraging BFH’s versatile mono platform, including RBC, Fiserv and Sezzle.

The company has been strengthening its balance sheet and lowering debt. Notably, its free cash flow conversion has been impressive over the last several quarters, reflecting its solid earnings. Bread Financial also intends to pay down $100 million remaining in 2026 bonds by this year to further improve leverage.

BFH remains focused on returning value to its shareholders. It uses share repurchases as a tool to mitigate the adverse impact of foreign exchange and intends to focus more on share buybacks and mergers and acquisitions.

The Zacks Consensus Estimate for Bread Financial’s 2025 revenues indicates a year-over-year increase of 3% from the corresponding 2024 estimates. BFH has a solid track record of beating earnings estimates in two of the last four quarters and missed in the other two, the average being 70.23%.

Conclusion

Robust credit sales, higher retained earnings, active risk management, solid consumer spending and capital deployment should continue to favor Bread Financial over the long term. 

Coupled with the positives, favorable growth estimates and the affordability of the stock, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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American Express Company (AXP) : Free Stock Analysis Report

LendingClub Corporation (LC) : Free Stock Analysis Report

Virtu Financial, Inc. (VIRT) : Free Stock Analysis Report

Bread Financial Holdings, Inc. (BFH) : Free Stock Analysis Report

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