Ally Financial (ALLY) AI Stock Analysis

• Market Cap: $12.10B
• Dividend Yield: 3.04%
• Average Volume (3M): 3.75M
• Price to Earnings (P/E): 23.6
• Beta (1Y): 1.14
• Revenue Growth: -6.89%
• EPS Growth: -33.20%
• Country: US
• Employees: 10,700
• Sector: Financial
• Sector Strength: 70
• Industry: Financial - Credit Services
• EPS (TTM): 1.15
• Shares Outstanding: 308,053,200
• 10 Day Avg. Volume: 3,109,026
• 30 Day Avg. Volume: 3,754,157
• PEG Ratio: -0.48
• Price to Book (P/B): 0.79
• Price to Sales (P/S): 0.68
• P/FCF Ratio: 10.35
• Enterprise Value/Market Cap: 2.78
• Enterprise Value/Revenue: 2.16
• Enterprise Value/Gross Profit: 4.94
• Enterprise Value/Ebitda: 19.52
• 1Y Price Target: $48.67
• Price Target Upside: 23.94% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 14
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 56 Neutral
• Price Target: $40.00 ▲(1.86% Upside)

Ally Financial's overall stock score is primarily influenced by its strong earnings growth and strategic initiatives in digital banking and AI, as highlighted in the earnings call. However, challenges in financial performance, particularly declining revenue and high leverage, weigh on the score. The technical analysis and valuation provide mixed signals, with potential overvaluation concerns balanced by a reasonable dividend yield.

Positive Factors

Earnings Growth

The significant increase in adjusted EPS indicates strong earnings growth, showcasing the company's ability to enhance profitability and operational efficiency.

Digital Banking Growth

Growth in digital banking reflects the company's strategic focus on technology, enhancing customer reach and reducing operational costs, supporting long-term growth.

AI Platform Introduction

The introduction of an AI platform enhances operational efficiency and innovation, positioning the company for improved productivity and competitive advantage.

Negative Factors

Declining Revenue

A declining revenue trend poses a challenge to growth and profitability, indicating potential issues in market demand or competitive positioning.

High Leverage

High leverage indicates financial risk, potentially limiting the company's ability to invest in growth opportunities and increasing vulnerability to economic downturns.

Negative Cash Flow Growth

Negative cash flow growth suggests challenges in converting earnings into cash, which can strain liquidity and hinder the company's ability to meet financial obligations.

Ally Financial Business Overview & Revenue Model

Company Description

Ally Financial Inc. is a diversified financial services company headquartered in Detroit, Michigan. It operates primarily in the automotive finance sector and offers a range of financial products and services including auto financing, banking, and insurance. The company serves consumers, dealers, and automotive manufacturers, providing solutions such as vehicle financing, online banking products, and investment services through its Ally Bank subsidiary.

How the Company Makes Money

Ally Financial generates revenue through several key streams. The primary source of income comes from its automotive finance segment, where it earns interest income from loans and leases made to consumers and dealers. Additionally, Ally Bank contributes to the revenue through interest on deposits and fees associated with its online banking products, including savings and checking accounts. The company also earns money from its insurance operations, providing various auto-related insurance products. Significant partnerships with automotive manufacturers and dealerships enhance its financing capabilities, while its focus on digital banking allows it to operate with lower overhead costs, further boosting profitability.

Ally Financial Financial Statement Overview

Summary

Ally Financial is experiencing challenges in profitability and cash flow generation. The net profit margin has notably declined, and there's pressure on operational efficiency with reduced EBIT and EBITDA margins. While the balance sheet shows moderate leverage and stability, improvements in profitability and free cash flow are essential for better financial health.

Income Statement

Ally Financial's income statement shows a mixed performance. The trailing twelve months (TTM) gross profit margin is approximately 42.1%, which is stable, but there is a notable decline in net profit margin to about 1.8% from 4.1% in the previous year. EBIT and EBITDA margins have also decreased, indicating pressure on operational efficiency. Revenue has seen a decline, evidenced by a negative growth rate of -4.2% compared to the previous annual report, which could be a concern if the trend continues.

Balance Sheet

The balance sheet reflects a moderate financial position with some areas of concern. The debt-to-equity ratio stands at 1.4, indicating moderate leverage, which is acceptable but should be closely monitored. Return on Equity (ROE) has decreased to 2.0%, down from 4.8%, highlighting challenges in generating profit from shareholder investments. However, the equity ratio is stable at 7.4%, suggesting a reasonable portion of assets are financed by equity. Overall, the company's financial stability seems adequate, but improvements in profitability are needed.

Cash Flow

Cash flow analysis exhibits some weaknesses. The operating cash flow to net income ratio is robust at 14.7, suggesting strong cash generation relative to net income. However, free cash flow has decreased significantly, with a negative growth rate of -40.8%, which could limit financial flexibility. The free cash flow to net income ratio is 2.2, indicating that free cash flow is lower compared to net income, a potential area for improvement. While cash flow generation remains, the decline in free cash flow should be monitored.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	15.52B	16.37B	15.97B	12.10B	10.69B	10.72B
Gross Profit	6.79B	6.73B	7.10B	7.84B	8.54B	6.04B
EBITDA	1.72B	2.04B	2.33B	3.67B	5.12B	2.96B
Net Income	344.00M	668.00M	957.00M	1.71B	3.06B	1.08B
Balance Sheet
Total Assets	189.47B	191.84B	196.33B	191.83B	182.11B	182.16B
Cash, Cash Equivalents and Short-Term Investments	29.36B	29.30B	26.66B	31.21B	38.45B	45.31B
Total Debt	19.73B	19.23B	20.98B	20.30B	17.20B	24.33B
Total Liabilities	174.93B	177.93B	182.63B	178.97B	165.06B	167.46B
Stockholders Equity	14.55B	13.90B	13.70B	12.86B	17.05B	14.70B
Cash Flow
Free Cash Flow	-252.00M	1.07B	1.80B	2.71B	-1.08B	-581.00M
Operating Cash Flow	3.50B	4.53B	4.56B	6.25B	4.04B	3.74B
Investing Cash Flow	4.17B	4.99B	-7.18B	-17.26B	-11.10B	8.43B
Financing Cash Flow	-4.28B	-5.57B	3.84B	11.57B	-3.85B	25.00M

Ally Financial Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 39.27
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ALLY, the sentiment is Positive. The current price of 39.27 is below the 20-day moving average (MA) of 39.75, below the 50-day MA of 40.30, and above the 200-day MA of 37.04, indicating a neutral trend. The MACD of -0.17 indicates Positive momentum. The RSI at 48.67 is Neutral, neither overbought nor oversold. The STOCH value of 47.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ALLY.

Ally Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
OMF	77 Outperform	$7.09B	10.22	21.41%	6.97%	9.51%	29.38%
SYF	72 Outperform	$26.36B	8.00	21.64%	1.57%	-6.38%	19.65%
SOFI	68 Neutral	$34.02B	55.38	8.59%	―	22.40%	215.81%
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
SLM	64 Neutral	$5.43B	9.43	27.85%	1.95%	0.59%	-1.11%
CACC	60 Neutral	$4.74B	11.38	28.14%	―	10.30%	154.64%
ALLY	56 Neutral	$12.10B	23.65	4.25%	3.04%	-6.89%	-33.20%