Ally Financial Gains 13.7% in 6 Months: Should You Buy the Stock Now?

Core Viewpoint - Ally Financial Inc. (ALLY) has experienced a 13.7% increase in share price over the past six months, outperforming both the industry and the S&P 500 index, which grew by 7.4% and 11% respectively [2][9]. Financial Performance - Ally Financial's net financing revenues have shown growth, supported by strong origination volumes and balance sheet repositioning actions [7][9]. - The company's total revenues for 2026 are projected to grow by 13% year-over-year, with estimates indicating a rise from $7.91 billion in 2025 to $8.95 billion in 2026 [10][11]. - The Zacks Consensus Estimate for earnings in 2026 suggests a year-over-year increase of 33.6%, with earnings per share expected to reach $5.09 [20][21]. Revenue Growth Factors - Ally Financial's net financing revenues have a compound annual growth rate (CAGR) of 4.9% over the six years ending in 2025, while net total finance receivables and loans recorded a CAGR of 3.1% over five years [7]. - The company has been restructuring operations to streamline its organizational structure, including divesting its credit card business and ceasing new mortgage loan originations [12]. Liquidity and Capital Management - As of December 31, 2025, Ally Financial had total debt of $21.8 billion and cash and cash equivalents of $10 billion, maintaining investment-grade ratings from major credit agencies [13]. - The company announced a multi-year share repurchase plan worth up to $2 billion, which resumed in the fourth quarter of 2025 [15]. Challenges - Weak asset quality remains a significant concern, with net charge-offs and provisions for loan losses expected to remain elevated due to high interest rates and inflationary pressures [16]. - Ally Financial has experienced a persistent rise in expenses, with a CAGR of 7.8% over the last six years, primarily due to increased compensation and benefits [17]. - The net interest margin (NIM) has faced pressure, declining from 3.32% in 2023 to 3.27% in 2024, influenced by rising deposit costs [18][19]. Valuation - Ally Financial's forward 12-month price-to-earnings (P/E) ratio is 8.12X, below the industry average of 9.39X, indicating that the shares are trading at a discount compared to peers [22]. Investment Outlook - Increasing net financing revenues and a solid liquidity position are expected to support Ally Financial's financials, alongside business streamlining initiatives and a focus on core operations [25]. - However, weak asset quality, NIM pressure, and elevated expenses present major near-term headwinds, making the stock a cautious bet for investors [26].