On the four Ms, Bread Financial Holdings Inc earns 66 for management and 62 for moat. The management score rests on a return on invested capital of 6.5% and a gross margin of 63.3% — figures that describe a business earning a respectable return on what it employs. Debt sits at 1.32x equity.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 7.3% a year, the rate measured from the filings. The exit multiple assumed is 10.9x. That produces an intrinsic value of $70.39, a 10-CAP price of $537.44 and a payback time price of $599.11, with the value zone set at the highest of the three, $599.11. Today's price of $96.94 sits inside that zone.
The price sits inside the value zone, but the business scores 62 for moat and 66 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $96.94 |
| Market cap | $3.9B |
| P/E ratio | 7.6x |
| Return on invested capital | 6.5% |
| Gross margin | 63.3% |
| Debt to equity | 1.32x |
| Free cash flow yield | 62.9% |
| Growth rate used | 7.3% |
| Growth rate measured | 7.0% |
| Exit multiple assumed | 10.9x |
| Company | Moat | Buy price |
| Slm Corp (SLM) | 77 | $35.87 |
| Credit Acceptance Corp (CACC) | 54 | $1,240.46 |
| Onemain Holdings Inc (OMF) | 74 | $279.10 |
| Ally Financial Inc (ALLY) | 25 | $23.91 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Bread Financial Holdings Inc rather than accepting ours.