Bread Financial Holdings, Inc. (NYSE: BFH)

Sector: Financial Services Industry: Credit Services CIK: 0001101215
Market Cap 3.42 Bn
P/B 1.03
P/E 6.61
P/S 1.32
ROIC (Qtr) 9.39
Div Yield % 1.18
Rev 1y % (Qtr) 18.50
Total Debt (Qtr) 4.31 Bn
Debt/Equity (Qtr) 1.29
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About

Investment thesis

Bull case

  • Strong operating cash flow of 2.09B provides robust 0.49x coverage of total debt 4.31B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 21.95B provides 5.09x coverage of total debt 4.31B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 2.09B provides strong 37.36x coverage of stock compensation 56M, indicating sustainable incentive practices.
  • Strong operating cash flow of 2.09B provides 1.55x coverage of SG&A expenses 1.35B, showing efficient operational cost management.
  • Robust free cash flow of 2.07B exceeds capital expenditure of 24M by 86.17x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 2.09B barely covers its investment activities of (1.37B), with a coverage ratio of -1.53, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 2.09B provides thin coverage of dividend payments of (42M) with a -49.81 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 2.07B represents just -1.54x of debt issuance (1.34B), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 1.48B provide limited buffer against comprehensive income items of (16M), which is -92.19x, indicating elevated exposure to market risks.
  • Operating cash flow of 2.09B is outpaced by equity issuance of (313M) (-6.68 ratio), indicating concerning reliance on equity markets for funding operations.

Revision of Prior Period Breakdown of Revenue (2019)

Peer comparison

Companies in the Credit Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 V Visa Inc. 877.17 Bn 208.55 89.23 21.18 Bn
2 MA Mastercard Inc 642.42 Bn 214.79 82.20 19.00 Bn
3 AXP American Express Co 398.94 Bn 79.20 13.57 57.76 Bn
4 COF Capital One Financial Corp 100.60 Bn 29.83 5.26 51.48 Bn
5 PYPL PayPal Holdings, Inc. 39.11 Bn 7.47 1.18 9.99 Bn
6 SYF Synchrony Financial 36.32 Bn 11.32 4.24 15.18 Bn
7 SOFI SoFi Technologies, Inc. 22.36 Bn 46.45 6.19 1.92 Bn
8 ALLY Ally Financial Inc. 13.05 Bn 47.46 1.66 20.63 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.15 1.15
EV to Cash from Ops. EV/CFO 1.65 13.47
EV to Debt EV to Debt 0.80 3.05
EV to EBIT EV/EBIT 5.63 -258.42
EV to EBITDA EV/EBITDA 4.96 -60.09
EV to Free Cash Flow [EV/FCF] EV/FCF 1.67 15.18
EV to Market Cap EV to Market Cap 1.01 11.30
EV to Revenue EV/Rev 1.32 14.62
Price to Book Value [P/B] P/B 1.03 4.87
Price to Earnings [P/E] P/E 6.61 21.22
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 12.33 2.61
Dividend Payout Ratio % Div Payout % (Qtr) 7.80 -4.41
Dividend per Basic Share Div per Share (Qtr) 0.86 0.75
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 1.95 5.28
Interest Coverage Int. cover (Qtr) 0.00 -72.18
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 33.33 -80.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -2.04 12.15
Dividend Growth (1y) % Div 1y % (Qtr) 2.38 6.19
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 87.00 -32.47
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 47.56 -5.45
EBIT Growth (1y) % EBIT 1y % (Qtr) 61.48 12.05
EBT Growth (1y) % EBT 1y % (Qtr) 61.48 -22.99
EPS Growth (1y) % EPS 1y % (Qtr) 98.39 -101.12
FCF Growth (1y) % FCF 1y % (Qtr) 13.44 143.56
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 6.64 8.09
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.11 0.25
Cash Payout Ratio Cash Payout (Qtr) 0.02 0.11
Cash Ratio Cash Ratio (Qtr) 0.00 0.31
Current Ratio Curr Ratio (Qtr) 0.00 0.88
Debt to Equity Ratio Debt/Equity (Qtr) 1.29 5.21
Interest Cover Ratio Int Coverage (Qtr) 0.00 -72.18
Times Interest Earned Times Interest Earned (Qtr) 0.00 -72.18
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 26.60 -19.26
EBIT Margin % EBIT Margin % (Qtr) 23.51 -7.08
EBT Margin % EBT Margin % (Qtr) 23.51 -29.92
Gross Margin % Gross Margin % (Qtr) 100.00 74.15
Net Profit Margin % Net Margin % (Qtr) 19.90 -44.14