Synchrony Financial (NYSE: SYF)

Sector: Financial Services Industry: Credit Services CIK: 0001601712
Market Cap 56.26 Bn
P/B 3.89
P/E 24.72
P/S 7.62
ROIC (Qtr) 10.81
Div Yield % 1.23
Rev 1y % (Qtr) 20.75
Total Debt (Qtr) 14.43 Bn
Debt/Equity (Qtr) 0.85

About

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 9.75B provides robust 0.68x coverage of total debt 14.43B, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 114.80B provides 7.96x coverage of total debt 14.43B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 9.75B provides exceptional 117.47x coverage of minority interest expenses 83M, showing strong core operations.
  • Strong operating cash flow of 9.75B provides 3.89x coverage of SG&A expenses 2.51B, showing efficient operational cost management.
  • Cash position of 16.25B provides exceptional 195.72x coverage of minority interest expenses 83M, indicating strong liquidity.

Bear case

  • Operating cash flow of 9.75B barely covers its investment activities of (5.17B), with a coverage ratio of -1.88, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 9.75B provides thin coverage of dividend payments of (418M) with a -23.33 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 9.75B represents just -8.01x of debt issuance (1.22B), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 23.98B provide limited buffer against comprehensive income items of (46M), which is -521.26x, indicating elevated exposure to market risks.
  • Operating cash flow of 9.75B is outpaced by equity issuance of (2.08B) (-4.69 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. 897.70 Bn 213.43 91.32 25.17 Bn
2 MA Mastercard Inc 549.07 Bn 116.38 39.35 18.98 Bn
3 AXP American Express Co 389.64 Bn 72.71 12.55 59.23 Bn
4 COF Capital One Financial Corp 122.55 Bn 35.40 7.22 51.48 Bn
5 SYF Synchrony Financial 56.26 Bn 24.72 7.62 14.43 Bn
6 PYPL PayPal Holdings, Inc. 52.76 Bn 10.73 1.61 11.28 Bn
7 SOFI SoFi Technologies, Inc. 26.69 Bn 41.69 8.03 2.81 Bn
8 SLM SLM Corp 13.42 Bn 32.96 4.56 6.84 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.55 1.25
EV to Cash from Ops. EV/CFO 6.80 -2.39
EV to Debt EV to Debt 4.45 3.81
EV to EBIT EV/EBIT 18.39 -243.68
EV to EBITDA EV/EBITDA 17.02 -39.22
EV to Free Cash Flow [EV/FCF] EV/FCF 6.80 -0.50
EV to Market Cap EV to Market Cap 1.14 10.27
EV to Revenue EV/Rev 8.70 14.05
Price to Book Value [P/B] P/B 3.89 5.89
Price to Earnings [P/E] P/E 24.72 20.09
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 8.35 1.69
Dividend Payout Ratio % Div Payout % (Qtr) 11.90 2.37
Dividend per Basic Share Div per Share (Qtr) 1.10 0.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 4.20 5.15
Interest Coverage Interest Coverage 0.00 -71.84
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex Growth (1y) % 0.00 -86.41
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -9.42 8.73
Dividend Growth (1y) % Div 1y % (Qtr) 10.00 5.83
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 12.54 -26.88
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 11.72 -2.66
EBIT Growth (1y) % EBIT 1y % (Qtr) 12.37 10.80
EBT Growth (1y) % EBT 1y % (Qtr) 12.37 -23.29
EPS Growth (1y) % EPS 1y % (Qtr) 19.38 -96.00
FCF Growth (1y) % FCF 1y % (Qtr) -0.63 143.12
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 7.08 7.95
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.08 0.24
Cash Payout Ratio Cash Payout (Qtr) 0.04 0.05
Cash Ratio Cash Ratio 0.00 0.31
Current Ratio Current Ratio 0.00 0.89
Debt to Equity Ratio Debt/Equity (Qtr) 0.85 5.21
Interest Cover Ratio Interest Cover Ratio 0.00 -71.84
Times Interest Earned Times Interest Earned 0.00 -71.84
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 52.40 -19.12
EBIT Margin % EBIT Margin % (Qtr) 47.27 -6.81
EBT Margin % EBT Margin % (Qtr) 47.27 -29.98
Gross Margin % Gross Margin % (Qtr) 100.00 74.11
Net Profit Margin % Net Margin % (Qtr) 36.20 -44.00