Ally Financial (ALLY) AI Stock Analysis

• Market Cap: $11.92B
• Dividend Yield: 3.12%
• Average Volume (3M): 3.21M
• Price to Earnings (P/E): 28.5
• Beta (1Y): 1.27
• Revenue Growth: -2.99%
• EPS Growth: -43.64%
• Country: US
• Employees: 10,700
• Sector: Financial
• Sector Strength: 73
• Industry: Financial - Credit Services
• EPS (TTM): 0.99
• Shares Outstanding: 307,174,700
• 10 Day Avg. Volume: 3,932,254
• 30 Day Avg. Volume: 3,208,063
• PEG Ratio: -0.32
• Price to Book (P/B): 0.82
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 18.90
• Enterprise Value/Market Cap: 1.76
• Enterprise Value/Revenue: 0.79
• Enterprise Value/Gross Profit: 3.10
• Enterprise Value/Ebitda: 24.64
• 1Y Price Target: $45.36
• Price Target Upside: 17.79% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 15

• Rating: 68 Neutral
• Price Target: $43.00 ▲(11.66%Upside)

Ally Financial's overall stock score is driven by a mix of financial challenges and positive momentum from technical indicators and earnings call insights. The high P/E ratio raises valuation concerns despite a modest dividend yield. The earnings call provided a positive outlook on strategic initiatives, but profitability and cash flow issues weigh on the financial performance.

Positive Factors

Capital Strength

The fully phased-in CET1 ratio rose to 7.6%, showing an improvement in capital strength.

Credit Performance

Favorable vintage dynamics are viewed as a key tailwind for Ally Financial, indicating potential for better credit quality.

Financial Performance

ALLY reported adjusted EPS of $0.99, above estimates and consensus.

Negative Factors

Credit Losses

Credit losses and delinquencies remain elevated but showing signs of improvement.

Management Guidance

Disappointment management didn’t revise lower its FY25 retail auto loan loss guidance after a better-than-expected 1Q.

Market Sentiment

Shares have underperformed peers over the last month.

Ally Financial Business Overview & Revenue Model

Company Description

Ally Financial Inc., a digital financial-services company, provides various digital financial products and services to consumer, commercial, and corporate customers primarily in the United States and Canada. It operates through four segments: Automotive Finance Operations, Insurance Operations, Mortgage Finance Operations, and Corporate Finance Operations. The Automotive Finance Operations segment offers automotive financing services, including providing retail installment sales contracts, loans and operating leases, term loans to dealers, financing dealer floorplans and other lines of credit to dealers, warehouse lines to automotive retailers, and fleet financing. It also provides financing services to companies and municipalities for the purchase or lease of vehicles, and vehicle-remarketing services. The Insurance Operations segment offers consumer finance protection and insurance products through the automotive dealer channel, and commercial insurance products directly to dealers. This segment provides vehicle service and maintenance contract, and guaranteed asset protection products; and underwrites commercial insurance coverages, which primarily insure dealers' vehicle inventory. The Mortgage Finance Operations segment manages consumer mortgage loan portfolio that includes bulk purchases of jumbo and low-to-moderate income mortgage loans originated by third parties, as well as direct-to-consumer mortgage offerings. The Corporate Finance Operations segment provides senior secured leveraged cash flow and asset-based loans to middle market companies; leveraged loans; and commercial real estate product to serve companies in the healthcare industry. The company also offers commercial banking products and services. In addition, it provides securities brokerage and investment advisory services. The company was formerly known as GMAC Inc. and changed its name to Ally Financial Inc. in May 2010. Ally Financial Inc. was founded in 1919 and is based in Detroit, Michigan.

How the Company Makes Money

Ally Financial generates revenue primarily through its diverse range of financial services. The company's key revenue streams include automotive finance, where it provides loans and leases to consumers and automotive dealers. Ally also earns revenue from insurance products related to automotive finance. Its online banking services, which include deposit products like savings accounts, generate interest income. Additionally, Ally's mortgage and corporate finance divisions contribute to its earnings by providing lending solutions to businesses and individuals. Strategic partnerships with automotive manufacturers and dealerships significantly bolster its financial services offerings, allowing it to maintain a strong presence in the automotive finance sector.

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

Ally Financial Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 38.51
• 50DMA: Positive
• 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 Neutral. The current price of 38.51 is below the 20-day moving average (MA) of 39.75, above the 50-day MA of 37.63, and above the 200-day MA of 36.21, indicating a neutral trend. The MACD of 0.22 indicates Positive momentum. The RSI at 47.67 is Neutral, neither overbought nor oversold. The STOCH value of 29.41 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for ALLY.

Ally Financial Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SYF	77 Outperform	$27.11B	8.85	20.23%	1.47%	-3.16%	14.60%
OMF	71 Outperform	$7.04B	10.70	20.47%	7.14%	9.41%	13.98%
SOFI	68 Neutral	$23.23B	45.41	8.80%	―	22.60%	―
ALLY	68 Neutral	$11.92B	28.53	3.84%	3.12%	-2.99%	-43.64%
CACC	68 Neutral	$5.98B	22.02	17.24%	―	13.77%	20.95%
Sector *	67 Neutral	¥747.59B	10.91	7.55%	3.22%	7.89%	15.26%
SLM	61 Neutral	$6.84B	16.56	18.99%	1.55%	-4.34%	-38.01%

Ally Financial Corporate Events

Ally Financial’s Strategic Executive Transition Announcement

Jason E. Schugel’s transition from Chief Risk Officer to Senior Operating Adviser at Ally Financial Inc. includes a comprehensive agreement ensuring his financial security and benefits until his departure by March 2025. The agreement outlines his compensation package, including a significant incentive plan, vested stock units, and a lump-sum payment, along with provisions for career transition support. This move reflects Ally’s strategic management adjustments and Schugel’s continued influence within the company, appealing to those tracking executive movements and corporate governance in the financial sector.