How Synchrony Financial’s New Partnerships Could Impact Share Price in 2025
Wondering if Synchrony Financial is a hidden gem or already fairly priced? You are not alone, especially with so many investors searching for value in today’s market.
The stock has climbed by 2.1% over the last week and is up 14.4% year-to-date. This underpins strong momentum that could signal renewed growth or changing risk perceptions.
Recent headlines have highlighted Synchrony’s expansion into new consumer financing areas and its latest strategic partnerships. Both of these developments seem to have caught market attention. These moves have provided fresh optimism and may help explain the recent shifts in share price.
On our valuation checks, Synchrony scores a 5 out of 6 for being undervalued, making it one of the stronger value cases in its sector. We will dig into each of the main valuation approaches next, so stay tuned. There is a smarter way to size up whether a stock is truly undervalued, which we will reveal at the end of this article.
The Excess Returns model is a valuation approach that assesses how much value a company creates over and above its cost of equity. In other words, it measures the profit generated from invested capital after accounting for the expected return that shareholders require. This model is particularly useful for financial businesses, where the relationship between equity, returns, and growth drives long-term value.
For Synchrony Financial, the latest key metrics from analyst consensus show a Book Value of $43.99 per share and a stable Earnings Per Share (EPS) estimate of $10.04, both based on forward-looking analyses. The company’s average Return on Equity stands at an impressive 19.69%, well above the cost of equity at $4.57 per share. This leads to an excess return of $5.48 per share, reflecting healthy value creation for shareholders. The stable Book Value is projected to reach $51.00 per share, according to the latest ten-analyst consensus.
Based on these forecasts and the Excess Returns model methodology, Synchrony Financial’s estimated intrinsic value per share is significantly higher than the current market price. The model indicates the stock is trading at a 49.3% discount.
The price-to-earnings (PE) ratio is widely recognized as a sensible valuation metric for profitable companies like Synchrony Financial. Since it directly compares a company’s share price to its earnings per share, the PE ratio reflects how much investors are willing to pay for each dollar of profit. This makes it especially useful for stable, profit-generating businesses.
What constitutes a “fair” PE ratio often depends on several factors, including growth prospects and perceived risks. Companies with higher expected earnings growth or lower risk usually command higher PE ratios. Conversely, if growth is slow or risks are elevated, investors typically demand a lower multiple before buying in.
Synchrony Financial currently trades at a PE ratio of 7.7x. By comparison, the average PE for the Consumer Finance industry is 9.7x. Synchrony’s peer group averages 52.2x, suggesting that the stock is trading below both benchmarks. However, direct comparisons can be misleading because businesses within the same industry can differ substantially in quality, growth rates, and risk profiles.
This is where Simply Wall St’s proprietary “Fair Ratio” comes in. The Fair Ratio for Synchrony Financial is calculated at 13.8x, reflecting what would be reasonable to pay for the company’s earnings, taking into account its sector, as well as its specific growth estimates, margins, risks, and size. It goes beyond peer and industry averages by digging deeper into business fundamentals.
Comparing the Fair Ratio of 13.8x to the actual PE of 7.7x, the analysis suggests Synchrony Financial is attractively valued on this metric.
Earlier, we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is simply your story about a company. It combines your chosen fair value and future estimates for Synchrony Financial’s revenue, earnings, and margins, then ties that outlook directly to a price you believe is justified. Narratives connect the real business story, such as recent retail partnerships or risks from competition, to a financial forecast and an actionable fair value, arming you with a big-picture yet tangible perspective.
Available on Simply Wall St’s Community page and used by millions, Narratives make it easy for any investor to track and update their view: whenever new earnings or news emerges, your Narrative (and thus your fair value) automatically adapts. Because Narratives explicitly show how your assumptions translate into a fair price, it helps you decide if Synchrony Financial’s current share price is below, above, or right at your “story-driven” fair value. This guides when you might want to buy or sell.
For instance, some investors see strong recurring revenue from new digital partnerships and forecast a fair value as high as $100. Others, more cautious about fintech competition or regulatory change, set their fair value closer to $60. Narratives empower you to invest with your own convictions, grounded in both numbers and real-world developments.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
