Synchrony Financial (NYSE
YF) is a consumer financial services company that provides a range of credit products through programs with retailers, merchants, manufacturers, and healthcare providers. It operates in the financial services sector, competing with companies like Citizens Financial Group, Discover Financial Services, Ally Financial, The Bank of New York Mellon Corporation, and M&T Bank Corporation.
In evaluating Synchrony Financial's performance, its Return on Invested Capital (ROIC) is 5.01%, while its Weighted Average Cost of Capital (WACC) is 16.11%. This results in a ROIC to WACC ratio of 0.31.
This ratio indicates that SYF is generating returns that are not sufficient to cover its cost of capital, but it is still performing better than most of its peers.
Citizens Financial Group (CFG) has a ROIC of 0.69% and a WACC of 17.38%, leading to a ROIC to WACC ratio of 0.04. This suggests that CFG is less efficient in generating returns compared to SYF.
Similarly, Ally Financial (ALLY) and The Bank of New York Mellon Corporation (BK) have ROIC to WACC ratios of 0.01, indicating even lower efficiency.
Discover Financial Services (DFS) stands out with a ROIC to WACC ratio of 0.13, the highest among the peers. Despite having a lower ROIC of 1.91% compared to SYF, its lower WACC of 14.91% allows it to achieve better efficiency in generating returns relative to its cost of capital. This makes DFS the most efficient among the group.
