Some financial stocks look cheap because the market sees trouble coming. Others look cheap because investors are still nervous about last year’s credit cycle. This one looks closer to the second case.
Credit losses are improving, capital returns are getting bigger, tangible book value keeps growing, and the stock still trades at a single-digit earnings multiple.
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What Just Happened
The quarter beat on earnings
Synchrony Financial (NYSE: SYF) reported first-quarter 2026 EPS of $2.27, ahead of the $2.20 estimate. Net earnings were $805 million, up from $757 million a year earlier, and EPS rose 20% from $1.89 last year. That is a clean result for a stock trading around 7.5x forward earnings.
Credit trends improved
The most important part of the quarter was credit quality. Net charge-offs fell to 5.42% of average loan receivables from 6.38% a year earlier, a 96-basis-point improvement. Loans 90+ days past due were also slightly lower year over year, and allowance coverage stood at 10.42%. For a consumer lender, that matters more than a flashy headline.
Capital returns got louder
Synchrony returned about $1.0 billion to shareholders in Q1, including $900 million of share repurchases and $104 million of common dividends. The board also approved a new $6.5 billion share repurchase program and plans to raise the quarterly dividend by 13% to $0.34 starting in Q3. That is a strong capital-return signal.
Why The Business Matters
This is a partner-driven credit platform
Synchrony powers credit cards, installment loans, banking products, and financing programs through major partners across retail, healthcare, digital platforms, and services. The company supports more than 73 million active accounts and works with brands like Amazon, PayPal, Lowe’s, and healthcare financing platform CareCredit.
The partnership network is the moat
Synchrony’s model is built around being embedded inside commerce and care decisions. That makes the company more than a generic credit-card lender. It is a financing layer for retailers, healthcare providers, and digital platforms that want to offer payment flexibility without building the credit infrastructure themselves.
CareCredit keeps expanding
In February, Synchrony expanded its Planet DDS partnership by integrating CareCredit across Planet DDS platforms, including more than 2,500 Cloud 9 orthodontic practices and over 15,000 Denticon dental practices. That strengthens Synchrony’s healthcare-financing channel and gives CareCredit more reach inside dental workflows.
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Why The Stock Has A Case
EPS growth has been excellent
You flagged that Synchrony’s EPS has grown 37.9% annually over the last two years, massively outpacing peers. Q1 added to that story with EPS up 20% year over year. That is not the kind of earnings profile that usually sits at 7.5x forward earnings unless investors are still pricing in credit stress.
Tangible book value keeps compounding
Tangible book value per share increased 8% year over year to $37.62 in Q1, while book value per share rose 12% to $45.29. You also noted that tangible book value per share has grown 15.9% annually over the last five years. That is one of the cleanest signals of value creation in financials.
Returns are strong
Synchrony produced a 2.7% return on average assets and a 24.5% return on tangible common equity in Q1. Those are excellent returns for a financial company, especially one trading at a discounted multiple.
The valuation is the hook
At roughly 7.5x forward earnings, SYF is priced like investors still expect a lot to go wrong. But credit trends are improving, buybacks are aggressive, and capital ratios remain healthy, with CET1 at 12.7% and total risk-based capital at 16.0%. That combination makes the stock look too cheap.
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What Has To Go Right
Credit losses need to stay under control
Management expects net charge-offs to remain below 5.5% for the full year, with losses peaking seasonally in Q2. If that holds, the market should get more comfortable with the earnings base.
Loan receivables need to grow
Synchrony expects mid-single-digit ending loan receivables growth by year-end, supported in part by roughly $725 million of Lowe’s commercial co-brand receivables onboarding. That growth needs to show up without forcing the company to lower credit standards.
Buybacks need to keep reducing the share count
The $6.5 billion repurchase authorization is large relative to the company’s market cap. If Synchrony keeps buying stock at a single-digit multiple while credit remains stable, per-share earnings and tangible book value should keep improving.
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What Could Trip It Up
Consumer credit can turn quickly
This is the main risk. Synchrony lends to consumers, and credit quality can deteriorate if unemployment rises, wages weaken, or lower-income households come under pressure. A few quarters of higher delinquencies would hit the stock quickly.
The business is sensitive to funding costs
Net interest margin improved to 15.50% in Q1, up 76 basis points year over year, helped by loan yields and lower interest expense. If funding costs rise again or deposit competition heats up, margin improvement gets harder.
Partner concentration always matters
Big partnerships are a strength, but they are also a risk. Synchrony depends on major partner relationships to keep driving account growth, purchase volume, and receivables. Losing or repricing a major relationship can pressure growth and sentiment.
What I’d Watch Next
The first thing to watch is net charge-offs. If they remain below the 5.5% full-year target, the bull case gets stronger. The second is loan receivables growth, especially whether new volume comes in without weaker credit quality.
The third is capital returns, because the new buyback can materially improve per-share metrics. The fourth is tangible book value per share, which remains one of the best scorecards for this stock.
My Take
Buy at current levels. Synchrony has strong EPS growth, excellent returns on tangible equity, improving credit quality, a growing tangible book value base, and a major buyback program. At roughly 7.5x forward earnings, the stock is too cheap for the current numbers.
The key risk is consumer credit. If charge-offs reaccelerate or delinquencies rise, the market will keep the stock at a low multiple. But with Q1 credit metrics improving and management guiding to net charge-offs below 5.5% this year, the risk-reward favors buying here.
Action Recap
💳 Looking to buy? Buy at current levels for a low-multiple financial with improving credit trends and strong capital returns.
📈 Already own it? Keep holding. EPS growth, tangible book value growth, and buybacks support more upside.
⚠️ Main risk to respect: Consumer credit is the swing factor. If charge-offs rise again, the stock gets punished fast.
The key risk is consumer credit. If charge-offs reaccelerate or delinquencies rise, the market will keep the stock at a low multiple. But with Q1 credit metrics improving and management guiding to net charge-offs below 5.5% this year, the risk-reward favors buying here.
That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.
Best Regards,
— Adam Garcia
Elite Trade Club
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