Shares of Synchrony Financial SYF have soared 43.7% in the past three months, outperforming the industry, sector and the S&P 500 Index’s 15.7%, 2.2%, and 11.8% growth, respectively. Currently priced at $67.92, the stock is just 1.6% shy of its 52-week high of $69. This proximity underscores investors’ confidence and market optimism about this company’s prospects. It has the ingredients for further price appreciation.

SYF's 1-Month Price Performance

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SYF Stock Earnings Estimates & Valuation

The Zacks Consensus Estimate for SYF’s 2024 earnings is pegged at $6.53 per share, which indicates an increase of 25.8% year over year. The estimate witnessed upward revisions over the past 60 days. SYF beat on earnings in three of the last four quarters and missed once, the average surprise being 2.8%. This is depicted in the graph below.

The consensus mark for 2024 and 2025 revenues indicates 5.3% and 2.7% year-over-year growth, respectively.

From a valuation perspective, $Synchrony Financial(SYF-B)$ is trading relatively cheap. Going by its price/earnings ratio, the company is trading at forward earnings multiple of 10.59X, lower than the industry average of 16.66X. 

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In comparison, companies like SoFi Technologies, Inc. SOFI and StoneX Group Inc. SNEX are trading at a P/E ratio of 57.55X and 12.81X, respectively.

SYF’s Key Drivers

Higher loan balances, a strong labor market and normalizing payment rates should further fuel growth in net interest income. The company’s Health & Wellness platform, thanks to a solid CareCredit brand, is expected to continue its growth track.

SYF’s focus on growing the brand with partnerships and collaborations is noteworthy. Its recent partnerships with PSIvet and DICK'S Sporting Goods strengthen its position in the market. By expanding CareCredit to over 5,500 veterinary practices and extending its long-standing relationship with DICKS’S Sporting Goods, SYF is poised to boost customer engagement through tailored financing options and reward programs, enhancing loyalty and growth opportunities. SYF recently announced its partnership with Daybreak, a provider of at-home sleep health solutions. 

Higher loan balances and stable delinquencies would further help the company’s financials in the future. In the second quarter of 2024, 30+ day and 90+ day delinquency rates have declined quarter to quarter. However, both metrics increased quarter over quarter in the recent quarter. Although the year-over-year increase persists, it moderates each quarter. These metrics provide a good understanding of SYF’s asset quality, which is important in determining its growth in the coming days.

Dual and co-branded cards comprised 43% of the total purchase volume in the third quarter. Synchrony Financial is enhancing its core value proposition by expanding its product utility, enabling customers to use digital wallets, make out-of-partner purchases, and get rewarded. Moreover, the consensus mark for current-year net interest income is $18 billion, indicating a 5.5% rise from the prior-year reported number.

Conclusion

SYF's robust net interest income growth fueled by higher loan balances and stable delinquency rates bode well for growth. The company’s expanding Health & Wellness platform and strong partnerships, such as those with PSIvet and DICK'S Sporting Goods, enhance its market position. Its focus on customer engagement through tailored financing options and digital innovation strengthens its competitive edge. These strengths make SYF an attractive choice for investors seeking a solid long-term investment in the Financial Miscellaneous Services market. 

SYF currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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