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Ally Financial (ALLY)
NYSE:ALLY
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Ally Financial
(NYSE:ALLY)
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Rating:51Neutral
Price Target:
$40.00
▲(0.93% Upside)
Ally Financial's overall stock score is primarily influenced by its strong earnings call performance, highlighting improvements in net interest margin and auto finance growth. However, financial performance challenges, including declining revenue and high leverage, weigh down the score. Technical analysis indicates bearish momentum, and the valuation suggests the stock is overvalued, further impacting the overall score.
Positive Factors
Auto Finance Growth
Strong auto finance growth with record application volumes indicates robust demand and market position, supporting long-term revenue.
Digital Bank Expansion
Consistent growth in digital banking customers enhances revenue streams and operational efficiency, leveraging technology for competitive advantage.
Net Interest Margin Improvement
Improved net interest margins reflect effective asset-liability management, enhancing profitability and financial stability over time.
Negative Factors
Declining Revenue
Decreasing revenue trends can hinder growth and profitability, necessitating strategic adjustments to sustain financial health.
High Leverage
Significant leverage increases financial risk, potentially limiting flexibility and increasing vulnerability to economic downturns.
Weak Cash Flow Generation
Poor cash flow conversion from earnings challenges operational funding and debt servicing, impacting long-term financial resilience.
Ally Financial (ALLY) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$11.96B
Dividend Yield3.03%
Average Volume (3M)3.31M
Price to Earnings (P/E)25.2
Beta (1Y)1.20
Revenue Growth-5.33%
EPS Growth-32.99%
CountryUS
Employees10,700
SectorFinancial
Sector Strength70
IndustryFinancial - Credit Services
Share Statistics
EPS (TTM)0.99
Shares Outstanding307,808,040
10 Day Avg. Volume4,501,720
30 Day Avg. Volume3,305,341
Financial Highlights & Ratios
PEG Ratio-0.48
Price to Book (P/B)0.79
Price to Sales (P/S)0.68
P/FCF Ratio10.35
Enterprise Value/Market Cap2.75
Enterprise Value/Revenue2.12
Enterprise Value/Gross Profit4.84
Enterprise Value/Ebitda19.11
Forecast
1Y Price Target
$46.93Price Target Upside18.42% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering15
Ally Financial Business Overview & Revenue Model
Company DescriptionAlly 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 MoneyAlly 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 Earnings Call Summary
Earnings Call Date:Jul 18, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Oct 17, 2025
Earnings Call Sentiment Positive
The earnings call reflects a strong financial performance with improvements in key areas such as net interest margin, auto finance growth, and credit quality. Despite some challenges like deposit balance decline and higher insurance costs, the company demonstrates robust strategic execution and momentum.Q2-2025 Updates
Positive Updates
Strong Financial Performance
Ally Financial reported adjusted earnings per share of $0.99 and core pre-tax income of $480 million, achieving double-digit year-over-year growth in both metrics.
Net Interest Margin Improvement
Net interest margin excluding core OID was 3.45%, expanding ten basis points quarter over quarter, more than offsetting a twenty basis point drag from the credit card business sale.
Robust Auto Finance Growth
Consumer originations reached $11 billion, driven by 3.9 million applications, marking the highest quarterly application volume ever for the second consecutive quarter.
Insurance Business Momentum
Average dealer inventory exposure rose by 23% year-over-year, with 3.9 million active policies outstanding, an increase of over one million since IPO.
Digital Bank Growth
The digital bank serves an all-time high of 3.4 million customers, marking 65 consecutive quarters of net customer growth, with balances of $143 billion.
Improved Credit Quality
Consolidated net charge-off rate was 1.10%, a decline of 40 basis points to the prior quarter and a decrease of 16 basis points to the prior year.
Negative Updates
Deposit Balance Decline
Overall deposit balance was down approximately $3 billion quarter over quarter, aligned with seasonal tax outflows.
Higher Insurance Costs
The renewal of the annual excess of loss policy came at a higher cost due to increased coverage levels, impacting current period results.
Commercial Floor Plan Balances
Commercial floor plan balances were muted partly due to tariffs, impacting dealer inventory levels.
Company Guidance
During the Q2 2025 earnings call, Ally Financial provided a comprehensive update on its financial performance and strategic direction. The company reported adjusted earnings per share of $0.99 and core pre-tax income of $480 million, showcasing double-digit year-over-year growth. The net interest margin, excluding core OID, expanded by ten basis points to 3.45%, despite a twenty basis point impact from selling its credit card business. Ally also achieved a core ROTCE of 13.6% for the quarter, with a core ROTCE of 10% when excluding AOCI benefits. The auto finance business reported consumer originations of $11 billion, driven by 3.9 million applications, marking the highest quarterly application volume for the second consecutive quarter. The company's insurance segment saw average dealer inventory exposure rise by 23% year-over-year. Meanwhile, in corporate finance, Ally generated a 31% ROE with attractive floating rate yields. The digital bank segment continued its growth, serving a record 3.4 million customers and maintaining deposit balances of $143 billion. Overall, Ally's strategic focus on disciplined execution, risk management, and customer-centric culture remains strong, positioning the company for sustainable returns and growth.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.45
Neutral
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.55
Neutral
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.40
Negative
| 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
Positive
39.63
Price Trends
40.04
Negative
38.61
Positive
36.75
Positive
Market Momentum
-0.34
Positive
41.17
Neutral
14.10
Positive
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 39.63 is below the 20-day moving average (MA) of 41.64, below the 50-day MA of 40.04, and above the 200-day MA of 36.75, indicating a neutral trend. The MACD of -0.34 indicates Positive momentum. The RSI at 41.17 is Neutral, neither overbought nor oversold. The STOCH value of 14.10 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ALLY.
Ally Financial Risk Analysis
Ally Financial disclosed 42 risk factors in its most recent earnings report. Ally Financial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Ally Financial Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $26.15B | 8.54 | 20.23% | 1.54% | -3.16% | 14.60% | |
75 Outperform | $30.78B | 52.38 | 8.80% | ― | 22.60% | ― | |
69 Neutral | $5.40B | 14.01 | 27.30% | ― | 12.63% | 149.03% | |
68 Neutral | $6.70B | 10.19 | 20.47% | 7.40% | 9.41% | 13.98% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
58 Neutral | $5.68B | 13.75 | 18.99% | 1.89% | -4.34% | -38.01% | |
51 Neutral | $11.96B | 25.24 | 4.18% | 3.03% | -5.33% | -32.99% |
* Financial Sector Average
ALLY
Ally Financial
39.63
5.59
16.42%
CACC
Credit Acceptance
485.86
42.68
9.63%
SLM
SLM
27.55
5.02
22.28%
SYF
Synchrony Financial
71.23
20.58
40.63%
OMF
OneMain Holdings
56.19
12.68
29.14%
SOFI
SoFi
25.24
16.97
205.20%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.