BFH Stock Trading at a Discount to Industry at 6.28X: Time to Hold?

Core Insights - Bread Financial Holdings, Inc. (BFH) shares are trading at a significant discount compared to the Zacks Financial - Miscellaneous Services industry, with a forward price-to-earnings multiple of 6.28X versus the industry average of 24.85X [1] - The company has a market capitalization of $2.55 billion and an average trading volume of 0.6 million shares over the last three months [1] Growth Projections - The Zacks Consensus Estimate for BFH's 2025 earnings per share indicates a year-over-year increase of 9.6%, with revenues projected at $3.87 billion, reflecting a 0.8% improvement [5] - For 2026, earnings per share and revenues are expected to increase by 6.1% and 3.4%, respectively, compared to 2025 estimates [5] Analyst Sentiment - One of three analysts covering BFH has raised estimates for 2025, and three of seven analysts have raised estimates for 2026 in the past 60 days, leading to a 4.1% and 1.8% increase in the Zacks Consensus Estimate for 2025 and 2026 earnings, respectively [7] Credit Sales and Strategic Investments - BFH anticipates credit sales growth driven by strong consumer spending, new partnerships, and holiday demand, with average loans expected to rise alongside higher credit sales [9][13] - The company is making strategic investments in digital innovation, technology, and marketing to drive growth [15] Financial Metrics - BFH's return on invested capital over the trailing 12 months was 9.7%, outperforming the industry average of 5.1% [12] - The company has been strengthening its balance sheet and reducing debt, with plans to pay down $100 million in 2026 bonds this year [16] Shareholder Value - BFH is focused on returning value to shareholders through share repurchases and intends to increase its focus on buybacks and mergers and acquisitions [17] - The stock has a favorable VGM Score of A, indicating attractive value, growth, and momentum compared to peers [18] Valuation and Market Position - The average target price for BFH, based on short-term price targets from 15 analysts, is $71 per share, suggesting a potential upside of 27.45% from the last closing price [10] - Higher return on capital, favorable growth estimates, and attractive valuations are expected to benefit BFH in the long term [19]