Why Ally Financial Stock Is An Attractive Investment Option
Zacks Investment Research | Dec 10, 2018 07:50AM ET
It seems to be a wise decision to add Ally Financial (NYSE:ALLY) stock to your portfolio now, given the company’s efforts to diversify revenues by enhancing digital offerings and introducing new products. Also, its restructuring and expansion activities as well as higher interest rates bode well for the future.
Further, analysts are bullish on the stock. The Zacks Consensus Estimate for the company’s earnings has been revised 1.3% upward over the past 30 days for 2018. As a result, the stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance seems impressive as well. Over the past two years, the stock has gained 23.6% against 14.5% decline of the industry it belongs to.
Two-Years Price Performance
Reasons to Buy Ally Financial Stock
Earnings growth: Ally Financial witnessed earnings growth of 43.8% over the past three to five years against 0.1% growth of the industry. This earnings momentum is likely to continue in the near term as reflected by the projected earnings per share growth of 35.6% for 2018 and 10.7% for 2019.
Notably, management projects adjusted earnings to grow 35-40% in 2018 on a year-over-year basis.
Moreover, Ally Financial has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 13.1%.
Further, the long-term (three-five years) projected earnings growth rate of 12.7% promises rewards for shareholders.
Revenue strength: Backed by strong originations and retail loan growth, Ally Financial’s revenues witnessed a CAGR of 17.4% over the last six years (2012-2017). Further, the company has been witnessing a steady improvement in net interest margin over the last several years.
Additionally, as part of its strategy to diversify into banking products, Ally Financial is making efforts to enhance its digital offerings and introduce new products to further boost profitability. Also, the wealth management and online brokerage initiatives related to the credit card offerings are on track.
Its projected sales growth rate of 1.6% for 2018 and 7.1% for 2019 ensures continuation of the upward revenue trend.
Efficient capital deployment plan: Ally Financial has significantly improved its balance sheet and fundamentals. The company’s 2018 capital plan (approved by the Federal Reserve) included a 15.4% dividend hike and $1-billion share repurchase authorization. Given the capital strength and favorable dividend payout ratio, the company will likely be able to sustain improved capital deployments.
Get The News You Want
Stock seems undervalued: With respect to the price/book and price/earnings ratios, Ally Financial seems undervalued. It has a P/B ratio of 0.78 and a P/E (F1) ratio of 7.65, both falling below the respective industry averages of 1.10 and 8.28.
Also, the stock has a Zacks Investment Research
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.