The Panic-Proof Portfolio (Stockchase Research) Synchrony Financial SYF-N TOP PICK Feb 25, 2025

Believes this is a business that does something that is differentiated. They provide value to the client that has the card and provide value to the retailer. Looking at the economics that is providing their service, it is attractive. They earn higher gross yields, which means they can sustain a higher write-off, which is going to be the nature of the beast when they do store cards, which is the nature of their business. The ROE’s they can generate are attractive and believes that the capital return will accelerate over time. He likes this business.

A financial stock, and he likes financials. It has done very well. Closed at $39.76, and he has a model price of $49.45, 25% higher. Pays out $.60. Looks like they are going to earn $3.46 this year.

SYF is a consumer finance company; the company was spun out of GE back in 2015. SYF has maintained an attractive Return on Equity (ROE) profile along with consistent share buybacks over the years. SYF is trading at 1.8x Forward P/E, an expansion compared to previous years of around 1.2x, given the recent improving operating results.

We think SYF still looks quite cheap, but the business is mature, and growth is quite limited, investors need an appropriate expectation for SYF that although it may not be a compounder, SYF can potentially do comfortably well around 10%-12% over the long term (price appreciation and dividends) for investors. Portfolio allocation is a personal decision, we tend not to recommend a precise allocation, depending on investors’ risk tolerance.
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