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

Bread Financial Holdings, Inc. BFH shares are trading at a discount compared with the Zacks Financial - Miscellaneous Services industry. Its forward price-to-earnings multiple of 6.28X is lower than the industry average of 24.85X, the Finance sector’s 17.49X, and the Zacks S&P 500 Composite’s 23.55X. The insurer has a Value Score of A.

The insurer has a market capitalization of $2.55 billion. The average volume of shares traded in the last three months was 0.6 million. 
Shares of Virtu Financial, Inc. VIRT, American Express Company AXP, and LendingClub Corporation LC are also trading at a discount to the industry average.

Shares of BFH have rallied 13% in the past year compared with the industry’s growth of 21.3%.

BFH’s Encouraging Growth Projection

The Zacks Consensus Estimate for Bread Financial’s 2025 earnings per share indicates a year-over-year increase of 9.6%. The consensus estimate for revenues is pegged at $3.87 billion, implying a year-over-year improvement of 0.8%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 6.1% and 3.4%, respectively, from the corresponding 2025 estimates.
BFH has an impressive Growth Score of B. This style score helps analyze the growth prospects of a company.

Optimist Analyst Sentiment on BFH

One of the three analysts covering the stock has raised estimates for 2025, and three of the seven analysts have raised the same for 2026 over the past 60 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 earnings has moved up 4.1% and 1.8%, respectively, in the past 60 days.

Average Target Price for BFH Suggests Upside

Based on short-term price targets offered by 15 analysts, the Zacks average price target is $71 per share. The average suggests a potential 27.45% upside from the last closing price.

BFH’s Return on Capital

The return on invested capital in the trailing 12 months was 9.7%, better than the industry average of 5.1%, reflecting the company’s efficiency in utilizing funds to generate income.

Factors Acting in Favor of BFH

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. Bread Financial also intends to pay down $100 million 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.

What to Do With BFH Stock?

Robust credit sales, higher retained earnings, active risk management, solid consumer spending, and capital deployment should continue to favor Bread Financial over the long term. 

BFH also has a VGM Score of A. Stocks with a favorable VGM Score are those with the most attractive value, best growth, and most promising momentum compared with peers. 

Higher return on capital, favorable growth estimates, as well as attractive valuations should continue to benefit Bread Financial over the long term. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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