Dj Synchrony Financial, Inst Holders, 3Q 2024 (Syf)

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Synchrony (SYF), a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Synchrony currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for SYF that show why this consumer credit company shows promise as a solid momentum pick.

Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For SYF, shares are up 1.87% over the past week while the Zacks Financial - Miscellaneous Services industry is down 0.56% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 17.88% compares favorably with the industry's 3.72% performance as well.

While any stock can see its price increase, it takes a real winner to consistently beat the market. That is why looking at longer term price metrics -- such as performance over the past three months or year -- can be useful as well. Over the past quarter, shares of Synchrony have risen 30.86%, and are up 119.47% in the last year. In comparison, the S&P 500 has only moved 6.16% and 32.62%, respectively.

Investors should also pay attention to SYF's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. SYF is currently averaging 4,280,048 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with SYF.

Over the past two months, 9 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost SYF's consensus estimate, increasing from $5.79 to $6.52 in the past 60 days. Looking at the next fiscal year, 10 estimates have moved upwards while there have been no downward revisions in the same time period.

Bottom Line

Given these factors, it shouldn't be surprising that SYF is a #1 (Strong Buy) stock and boasts a Momentum Score of B. If you're looking for a fresh pick that's set to soar in the near-term, make sure to keep Synchrony on your short list.

Zacks Investment Research

Investors interested in Financial - Miscellaneous Services stocks are likely familiar with Synchrony (SYF) and Brookfield Asset Management (BAM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Synchrony is sporting a Zacks Rank of #1 (Strong Buy), while Brookfield Asset Management has a Zacks Rank of #2 (Buy). This means that SYF's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

SYF currently has a forward P/E ratio of 10, while BAM has a forward P/E of 37.70. We also note that SYF has a PEG ratio of 0.90. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. BAM currently has a PEG ratio of 2.28.

Another notable valuation metric for SYF is its P/B ratio of 1.72. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BAM has a P/B of 7.60.

These are just a few of the metrics contributing to SYF's Value grade of A and BAM's Value grade of D.

SYF sticks out from BAM in both our Zacks Rank and Style Scores models, so value investors will likely feel that SYF is the better option right now.

Zacks Investment Research

It has been about a month since the last earnings report for Euronet Worldwide (EEFT). Shares have added about 2.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Euronet Worldwide due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Euronet Worldwide Q3 Earnings Miss on High Costs

Euronet Worldwide’s adjusted earnings of $3.03 per share fell short of the Zacks Consensus Estimate by 2.9%. Yet, the bottom line improved 11% year over year.

Total revenues amounted to $1.1 billion, which advanced 9% year over year and on a constant-currency basis. The top line beat the consensus mark by 3.6%.

The quarterly earnings was affected by inflationary pressures, rising operating expenses and adversities on the epay segment from limited promotional campaigns. The negatives were partly offset by robust growth in high-volume low-value transactions in India, strong cross-border and direct-to-consumer digital transaction growth in the Money Transfer segment and expanding merchant services business.

EEFT’s Q3 Update

EEFT’s net income of $151.6 million climbed 45.5% year over year. Operating income grew 9% year over year and on a constant-currency basis to $182.2 million.

Total operating expenses were $917.1 million, which escalated 9.6% year over year due to higher direct operating costs, salaries and benefits and selling, general and administrative expenses.

Adjusted EBITDA of $225.7 million rose 6% year over year and on a constant-currency basis.

EEFT’s Segmental Performances

The EFT Processing segment recorded revenues of $373 million in the third quarter, which advanced 8% year over year and 7% on a constant-currency basis. However, the metric missed the Zacks Consensus Estimate of $373.9 million.

Adjusted EBITDA rose 10% year over year and on a constant-currency basis to $142.1 million.

Operating income of $117.3 million improved 12% year over year and on a constant-currency basis. Total transactions climbed 34% year over year to 2,982 million on the back of improved high-volume low-value transactions across India.

Continued growth in travel, an improved merchant services business and expansion into new markets benefited the unit’s performance.

The epay segment’s revenues rose 10% year over year and on a constant-currency basis to $290.3 million. The reported figure surpassed the consensus mark of $265.5 million.

Adjusted EBITDA of $31 million increased 3% year over year and on a constant-currency basis .

Operating income grew 3% year over year and 2% on a constant-currency basis to $29.1 million. Transactions in the unit totaled 1,126 million, which climbed 22% year over year.

The segment’s quarterly results were aided by continued digital media and mobile growth, partly offset by inflationary headwinds and costs associated with launching new proprietary products.

The Money Transfer segment reported revenues of $438.2 million in the third quarter, which advanced 11% year over year and 10% on a constant-currency basis. The metric surpassed the Zacks Consensus Estimate of $423.4 million.

Adjusted EBITDA grew 6% year over year and 4% on a constant-currency basis to $64.1 million.

Operating income was $58.1 million, which improved 8% year over year and 7% on a constant-currency basis. Total transactions increased 11% year over year to 45.1 million as a result of higher cross-border transactions and direct-to-consumer digital transactions. However, the upside was partly offset by a decline in intra-U.S. transactions.

Corporate and Other expenses escalated 12.6% year over year to $22.3 million.

EEFT’s Financial Update (as of Sept. 30, 2024)

Euronet exited the third quarter with cash and cash equivalents of $1.5 billion, which improved 21.5% from the 2023-end level.

Total assets of $6.3 billion increased 6.7% from the figure at 2023-end.

Debt obligations, net of the current portion, amounted to $1.2 billion, which dropped 30.3% from the figure as of Dec. 31, 2023. Short-term debt was $1.1 billion.

Equity improved 9% from the 2023-end figure to $1.4 billion.

There was roughly $669.8 million left under EEFT’s revolving credit facilities at the third-quarter end.

EEFT’s 2024 Bottom-Line View Reaffirmed

Management continues to expect adjusted earnings per share (EPS) to record 10-15% year-over-year growth in 2024. Additionally, it anticipates achieving adjusted EPS growth in the 10-15% range in 2025.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

The consensus estimate has shifted 5.05% due to these changes.

VGM Scores

Currently, Euronet Worldwide has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Euronet Worldwide has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Euronet Worldwide belongs to the Zacks Financial - Miscellaneous Services industry. Another stock from the same industry, Synchrony (SYF), has gained 17.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Synchrony reported revenues of $4.61 billion in the last reported quarter, representing a year-over-year change of +5.7%. EPS of $1.94 for the same period compares with $1.48 a year ago.

For the current quarter, Synchrony is expected to post earnings of $1.88 per share, indicating a change of +82.5% from the year-ago quarter. The Zacks Consensus Estimate has changed +3% over the last 30 days.

Synchrony has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.

Zacks Investment Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Synchrony Financial (SYF). SYF is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 10 right now. For comparison, its industry sports an average P/E of 16.19. Over the past year, SYF's Forward P/E has been as high as 10.55 and as low as 5.49, with a median of 7.46.

Another valuation metric that we should highlight is SYF's P/B ratio of 1.70. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 2.88. Over the past 12 months, SYF's P/B has been as high as 1.78 and as low as 0.93, with a median of 1.28.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. SYF has a P/S ratio of 1.13. This compares to its industry's average P/S of 1.97.

Finally, our model also underscores that SYF has a P/CF ratio of 7.01. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 18.01. SYF's P/CF has been as high as 7.35 and as low as 4.37, with a median of 5.64, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Synchrony Financial is likely undervalued currently. And when considering the strength of its earnings outlook, SYF sticks out at as one of the market's strongest value stocks.

Zacks Investment Research