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Are Investors Undervaluing Synchrony (SYF) Right Now?

Zacks

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system’s “Value” category. Stocks with both “A” grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Synchrony (SYF). SYF is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 6.90, which compares to its industry’s average of 9.70. Over the past year, SYF’s Forward P/E has been as high as 10.72 and as low as 5.19, with a median of 8.20.


Investors should also note that SYF holds a PEG ratio of 0.77. 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. SYF’s PEG compares to its industry’s average PEG of 1.08. Within the past year, SYF’s PEG has been as high as 1.40 and as low as 0.49, with a median of 0.79.

Investors should also recognize that SYF has a P/B ratio of 1.49. 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. This company’s current P/B looks solid when compared to its industry’s average P/B of 1.85. SYF’s P/B has been as high as 2.02 and as low as 1.14, with a median of 1.65, over the past year.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SYF has a P/S ratio of 1.21. This compares to its industry’s average P/S of 1.85.

Finally, investors should note that SYF has a P/CF ratio of 7.11. This data point considers a firm’s operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock’s P/CF looks attractive against its industry’s average P/CF of 11.45. Within the past 12 months, SYF’s P/CF has been as high as 13.39 and as low as 5.49, with a median of 9.55.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Synchrony is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SYF feels like a great value stock at the moment.


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