Synchrony Financial (SYF)

Conclusion

Synchrony Financial is a US consumer financial services company. It provides credit cards, private label and co-branded cards, installment loans and deposit products, including healthcare payment programmes under the CareCredit and Walgreens brands. At 73.22 USD on 9 November 2026, the market capitalisation is 23.8 billion USD.

The verdict is undervalued. The P/E is 7.15 against a ten-year median of 7.32, EV/EBITDA is 5.21 against 5.06, and price-to-book is 1.44 against 1.62. The discounted cash flow gives 436.15 USD per share at a discount rate of 11.9%. The fair value band runs from 206.27 to 309.40 USD with a midpoint of 257.83 USD, a margin of safety of 252.1% at the current price. The fair value from historical multiples is 79.52 USD. The reverse DCF implied growth is out of range and cannot be read, so the growth the price implies cannot be set against the growth delivered: revenue compounded at 8.3% over five years and earnings per share at 33.2%.

The strongest numbers are a return on invested capital of 19.0% against a WACC of 10.4%, free cash flow conversion of 2.87 times over the last twelve months, and a Piotroski score of 7 out of 9. The weakest are interest coverage of 1.12, which leaves little room if funding costs rise, and an operating margin of 23.1% against a ten-year median of 24.2%.

Financial health

Financial strength is grey, because for a financial business debt is part of the trade and the usual tests do not apply. Net debt to EBITDA of 0.23 is the most comfortable figure. Debt to equity stands at 1.03, and interest coverage of 1.12 is assessed as a risk. The current and quick ratios are not available. The Altman Z-score cannot be computed because inputs are missing, and its zone is therefore not available; the model was designed for manufacturers, not for a financial company. Insolvency risk: the Ohlson model does not apply to a financial business.

Earnings quality

Earnings quality is green, with the strongest evidence in cash generation and the share count. Free cash flow conversion is 2.87 times on a trailing twelve-month basis and 2.55 times over five years. Free cash flow after stock-based compensation is 9.56 billion USD. The accrual ratio is -5.3%, and stock-based compensation to revenue is not available. The share count has fallen at a compound 9.3% a year over five years, which reflects buybacks. The Piotroski score is 7 out of 9. The Beneish M-score reading is not available. Earnings beat expectations in 7 of the last 8 quarters, with an average surprise of 16.1%. Over the last 30 days, 12 analysts raised next-year estimates and 4 lowered them, with next-year earnings growth estimated at 9.9%.

Profitability

Profitability is green, led by a return on capital above the cost of capital. Gross margin is 51.7% against a median of 51.2%, operating margin 23.1% against 24.2%, and net margin 17.6% against 18.4%. Return on invested capital is 19.0% against a WACC of 10.4%, with the given difference of 8.6%. Its five-year median is 24.3%. Return on equity is 20.1%, but the DuPont split shows leverage doing much of the work: net margin 18.6%, asset turnover 0.16 and an equity multiplier of 7.10. Return on equity therefore overstates the underlying economics relative to return on invested capital.

Growth

Growth is green. Revenue compounded at 13.2% over three years, 8.3% over five and 5.8% over ten. Earnings per share compounded at 16.7% over three years, 33.2% over five and 14.1% over ten. Free cash flow per share compounded at 25.7%, 16.5% and 14.0% over the same periods. Revenue grew in 7 of 10 comparable years. The three-year rates are well above the ten-year rates, so recent expansion has been stronger than the long-run record, and the estimate for next year sits at 9.9% earnings growth.

Valuation

Valuation is green, and the verdict is undervalued. Against ten-year medians, the P/E of 7.15 (median 7.32) shows a premium of -2.4%, EV/EBITDA of 5.21 (median 5.06) a premium of 2.8%, price to free cash flow of 2.49 (median 2.74) a premium of -8.9%, price to sales of 1.26 (median 1.37) a premium of -7.9%, and price to book of 1.44 (median 1.62) a premium of -11.0%. The discounted cash flow gives 436.15 USD per share at a discount rate of 11.9%, with 45.2% of its value in the terminal period. The fair value band is 206.27 to 309.40 USD, with a midpoint of 257.83 USD. These figures rest on fixed assumptions, including a 5% equity risk premium and capped growth, and are not a price target. Dividend yield is 2.1%, the payout on free cash flow is 5.3%, and the forward yield is 1.8%.

Risks

The main risk is funding. Interest coverage of 1.12 means earnings cover interest only narrowly, so a rise in funding costs, with the cost of debt at 10.9%, would press directly on profit. A higher equity multiplier of 7.10 would amplify any fall in returns on equity. The operating margin is slightly below its median, and a further decline would weaken the return on capital that supports the case. The distance between the discounted cash flow value of 436.15 USD, the fair value band and the fair value from historical multiples of 79.52 USD is itself a caution: the result depends heavily on forecast assumptions. Several values are not available: the current and quick ratios, the Altman Z-score, stock-based compensation to revenue, the Beneish M-score and the reverse DCF implied growth. This analysis also lacks a debt maturity schedule and revenue by segment, which limits any view on refinancing or the concentration of earnings.