Bread Financial Holdings, Inc. (NYSE: BFH)

Sector: Financial Services Industry: Credit Services CIK: 0001101215
Market Cap 3.70 Bn
P/B 1.11
P/E 7.83
P/S 1.47
ROIC (Qtr) 7.15
Div Yield % 1.37
Rev 1y % (Qtr) 9.45
Total Debt (Qtr) 3.79 Bn
Debt/Equity (Qtr) 1.14

About

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 2B provides robust 0.53x coverage of total debt 3.79B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 20.99B provides 5.54x coverage of total debt 3.79B, indicating robust asset backing and low credit risk.
  • Robust free cash flow of 1.98B exceeds capital expenditure of 27M by 73.19x, indicating strong organic growth funding capability.
  • Operating cash flow of 2B provides strong 37.09x coverage of stock compensation 54M, indicating sustainable incentive practices.
  • Retained earnings of 1.43B provide strong 1.98x coverage of intangibles 723M, indicating quality earnings retention.

Bear case

  • Operating cash flow of 2B barely covers its investment activities of (1.22B), with a coverage ratio of -1.64, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 2B provides thin coverage of dividend payments of (42M) with a -47.69 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 1.98B represents just -2.28x of debt issuance (868M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 1.43B provide limited buffer against comprehensive income items of (16M), which is -89.50x, indicating elevated exposure to market risks.
  • Operating cash flow of 2B is outpaced by equity issuance of (234M) (-8.56 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Credit Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 V Visa Inc. 685.45 Bn 34.17 17.14 25.17 Bn
2 MA Mastercard Inc 520.38 Bn 36.52 16.53 18.98 Bn
3 AXP American Express Co 266.36 Bn 25.27 4.08 59.23 Bn
4 COF Capital One Financial Corp 111.93 Bn 102.41 3.87 51.48 Bn
5 PYPL PayPal Holdings, Inc. 58.35 Bn 11.87 1.78 11.28 Bn
6 SYF Synchrony Financial 32.00 Bn 9.16 3.32 14.43 Bn
7 SOFI SoFi Technologies, Inc. 29.56 Bn 46.17 8.90 2.81 Bn
8 ALLY Ally Financial Inc. 14.44 Bn 52.52 1.83 20.63 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.19 1.03
EV to Cash from Ops. EV/CFO 2.06 4.72
EV to Debt EV to Debt 1.09 2.99
EV to EBIT EV/EBIT 7.69 -246.63
EV to EBITDA EV/EBITDA 6.62 -62.30
EV to Free Cash Flow [EV/FCF] EV/FCF 2.09 7.33
EV to Market Cap EV to Market Cap 1.12 10.21
EV to Revenue EV/Rev 1.64 10.01
Price to Book Value [P/B] P/B 1.11 3.47
Price to Earnings [P/E] P/E 7.83 13.86
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 11.24 1.59
Dividend Payout Ratio % Div Payout % (Qtr) 8.40 2.22
Dividend per Basic Share Div per Share (Qtr) 0.84 0.68
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 1.98 4.82
Interest Coverage Int. cover (Qtr) 0.00 -64.96
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 46.00 -85.80
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 9.07 7.91
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 5.47
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 51.28 16.85
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 20.27 -0.69
EBIT Growth (1y) % EBIT 1y % (Qtr) 26.71 33.67
EBT Growth (1y) % EBT 1y % (Qtr) 26.71 1.73
EPS Growth (1y) % EPS 1y % (Qtr) 56.60 -64.54
FCF Growth (1y) % FCF 1y % (Qtr) 1.49 129.37
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.70 18.73
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.12 0.23
Cash Payout Ratio Cash Payout (Qtr) 0.02 0.05
Cash Ratio Cash Ratio (Qtr) 0.00 0.46
Current Ratio Curr Ratio (Qtr) 0.00 1.05
Debt to Equity Ratio Debt/Equity (Qtr) 1.14 4.88
Interest Cover Ratio Int Coverage (Qtr) 0.00 -64.96
Times Interest Earned Times Interest Earned (Qtr) 0.00 -64.96
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 24.70 -17.83
EBIT Margin % EBIT Margin % (Qtr) 21.36 125.65
EBT Margin % EBT Margin % (Qtr) 21.36 -9.92
Gross Margin % Gross Margin % (Qtr) 100.00 72.34
Net Profit Margin % Net Margin % (Qtr) 18.80 -23.76