Bread Financial Holdings, Inc. BFH shares have surged 95.3% in the year-to-date (YTD) period compared with the industry's growth of 19.7%. The Finance sector and the Zacks S&P 500 index have returned 22.2% and 27.4% YTD, respectively. With a market capitalization of $3.20 billion, the average volume of shares traded in the last three months was 0.8 million.

BFH Outperforms Industry, Sector, S&P YTD

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The stock currently carries a Zacks Rank #3 (Hold) and is closed at $64.33 on Tuesday, near its 52-week high of $65.27. This proximity underscores investor confidence. It has the ingredients for further price appreciation.

BFH Trading Above 50-Day and 200-Day Moving Average

The stock is trading above its 50-day and 200-day simple moving average (SMA) of $54.30 and $46.50, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

BFH Shares are Affordable

BFH shares are trading at a discount to the Zacks Financial Transaction Services industry. Its forward price-to-earnings of 10.14X is lower than the industry average of 16.43X. It has a Value Score of A.

Factors Acting in Favor of BFH

This Financial Transaction Services stock’s earnings beat estimates in two of the trailing four quarters and missed twice, delivering an average surprise of 70.23%. 

The credit sales performance is expected to improve on the back of solid consumer spending. With the continued growth of credit sales, average loans are likely to increase. With new partner additions and holiday spending, BFH continues to expect strong credit sales.

Credit metrics should remain strong with delinquency and net loss rates remaining below the historical averages. Given disciplined, proactive risk management and strong consumer payment behavior, net loss rates are expected to remain low.

BFH is prudently investing in strategic growth areas and ramping up marketing spending in growth verticals and digital innovation and technology enhancements. Bread Financial stated that ramping up its digital and technology capabilities remains a top priority this year. It has strategic relationships leveraging BFH’s versatile mono platform, including RBC, Fiserv and Sezzle.

The company has been strengthening its balance sheet and lowering debt. Notably, its free cash flow conversion has been impressive over the last several quarters, reflecting its solid earnings. Leverage improved to less than 115% by third-quarter 2024 end from 400% three years back. Bread Financial also intends to pay down $100 million remaining in 2026 bonds by this year to further improve leverage.

BFH remains focused on returning value to its shareholders. It uses share repurchases as a tool to mitigate the adverse impact of foreign exchange and intends to focus more on share buybacks and mergers and acquisitions.

Headwinds

However, Bread Financial has been witnessing a rise in non-interest expenses for the past few years. The company expects the net loss rate to be in the low 8% range for 2024, increasing in the second quarter at around 9% as inflation continues to pressure consumers’ ability to pay and moderate their spending. Nonetheless, the company expects the loss rate to increase in the fourth quarter of 2024.

Stocks to Consider

Some better-ranked stocks from the financial transaction service providers are Globe Life Inc. GL, LendingClub Corporation LC and FlexShopper Inc. FPAY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Globe Life’s 2024 and 2025 earnings implies year-over-year growth of 15.5% and 9.8%, respectively. It beat earnings estimates in three of the past four quarters and missed in one, with an average surprise of 4.58%. Year to date, shares of GL have lost 14.8%.

The Zacks Consensus Estimate for LendingClub’s 2024 and 2025 revenues implies year-over-year growth of 30.5% and 69.5%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 231.85%. Year to date, shares of LC have surged 76.2%.

The Zacks Consensus Estimate for FlexShopper’s 2024 and 2025 revenues implies year-over-year growth of 78.4% and 454.5%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 72.95%. Year to date, shares of FPAY have gained 17.4%.

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LendingClub Corporation (LC) : Free Stock Analysis Report

FlexShopper Inc. (FPAY) : Free Stock Analysis Report

Globe Life Inc. (GL) : Free Stock Analysis Report

Bread Financial Holdings, Inc. (BFH) : Free Stock Analysis Report

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