Ally Financial Inc. (ALLY) | Investment Case

1. Company Snapshot

1.a. 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.

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1.b. Last Insights on ALLY

Ally Financial's recent performance has been driven by robust Q2 and Q3 earnings growth, with EPS growth projected to be robust through 2027. The company's Q2 results beat expectations due to cost controls and lower credit losses. A strong net interest margin of 3.45% and solid CET1 levels support potential buybacks. The company is streamlining operations, focusing on auto finance, insurance, and corporate lending. A quarterly dividend of $0.30 per share of common stock was declared, and a $15.9 million dividend payment on Series B preferred stock.

1.c. Company Highlights

Last Price	42.14
Change Percentage	-0.05%
Open	42.56
Previous Close	42.16
Market Cap ( Millions)	12981
Volume	666065
Year High	47.27
Year Low	29.52
M A 50	43.47
M A 200	39.53

FCF Yield	-2.27%
Dividend Yield	2.85%
ROE	5.74%
Debt / Equity	140.44%
Net Debt / EBIDTA	596.90%
Price To Book	0.84
Price Earnings Ratio	15.37
Price To FCF	-43.99
Price To sales	1.07
EV / EBITDA	12.57

2. Ally Financial's Strategic Refresh Delivers Solid Results

Ally Financial Inc. reported adjusted EPS of $3.81 for 2025, up 62% year over year, driven by a 3% increase in adjusted net revenue to $8.5 billion. The company's net interest margin (NIM) expanded by over 30 basis points in 2025, setting the stage for further margin expansion in 2026. The actual EPS for the fourth quarter came out at $1.15, beating estimates of $1. The company's adjusted tangible book value per share was $40, up nearly 20% in the past year.

Publication Date: Jan -22

                                    📋 Highlights
                                    Earnings Growth & Return Metrics::
                                                Adjusted EPS surged to $3.81 (62% YoY), with core ROTCE at 10.4% (300 bps increase), signaling improved profitability.
Revenue & Margin Expansion::
                                                Adjusted net revenue hit $8.5B (+3% YoY), while NIM rose over 30 bps, with further margin gains expected in 2026.
Capital Returns & Balance Sheet::
                                                $2B open-ended buyback authorization and a CET1 ratio of 8.3% (up 120 bps YoY) reflect strong capital positioning.
Credit & Risk Management::
                                                Retail auto NCOs fell below 2%, with Q4 provision expense down $71M to $486M, driven by improved credit trends.
Strategic Growth Drivers::
                                                $10.8B consumer originations (+6% YoY) and insurance core pretax income of $89M highlight diversified revenue resilience.

                                

Segment Performance

The retail auto segment saw consumer originations grow by 6% year-over-year to $10.8 billion, driven by a 10% increase in application volume. The insurance business delivered core pretax income of $89 million, with total written premiums of $384 million. Corporate finance reported core pretax income of $98 million, with a 29% return on equity (ROE) in the fourth quarter.

Outlook and Guidance

The company expects full-year NIM between 3.6-3.7%, with retail auto and corporate finance growing in the mid-single digits. Ally Financial anticipates consolidated net charge-offs between 1.2-1.4% and an effective tax rate between 22-23%. The company is optimistic about 2026, with expectations of continuity in NIM and growth in fee income.

Valuation and Return Metrics

With a Price-to-Tangible Book Value (P/TBV) ratio of approximately 0.87, the market is pricing in a relatively modest growth expectation. The company's Dividend Yield stands at 2.83%, providing a stable return for shareholders. Ally Financial's return on equity (ROE) was 4.38%, and the company is targeting mid-teens ROTC through high three NIMs, sub-2% retail auto NCO rate, and continued discipline around capital and expenses.

Capital Management and Buybacks

Ally Financial has announced a $2 billion open-ended share repurchase authorization and expects to start slow and increase buybacks as it approaches the 9% CET1 target. The company's updated methodology for calculating returns aims to increase transparency and comparability, aligning returns with book value and earnings per share. Analysts estimate next year's revenue growth at 5.5%, indicating a positive outlook for the company's prospects.

3. NewsRoom

2 Warren Buffett Stocks to Buy Hand Over Fist in February

04:05

Source: fool.com

2 Bank Stocks That Could Soar in 2026

Jan -29

Source: fool.com

Ally Financial to present at the BofA Securities Financial Services Conference

Jan -28

Source: prnewswire.com

Ally Appoints Distinguished Financial Services Executive and Former Regulator Rodney Hood as Senior Policy Advisor to the CEO

Jan -27

Source: prnewswire.com

1834 Investment Advisors Co. Sells 26,075 Shares of Ally Financial Inc. $ALLY

Jan -25

Source: defenseworld.net

Ally Financial Pops on Q4 Earnings Beat and $2 Billion Buyback

Jan -23

Source: marketbeat.com

ALLY Q4 Earnings Beat as Revenues Grow Y/Y & Provisions Decline

Jan -22

Source: zacks.com

Is the Options Market Predicting a Spike in Ally Financial Stock?

Jan -22

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.62%)

6. Segments

Automotive Finance

Expected Growth: 6.5%

Ally Financial Inc.'s 6.5% growth in Automotive Finance is driven by increasing demand for vehicle financing, strategic partnerships with dealerships, and a strong online presence. Additionally, the company's diversified product offerings, including leasing and insurance services, contribute to its growth. Furthermore, Ally's digital platform and mobile app provide a seamless customer experience, attracting more customers and driving business expansion.

Insurance

Expected Growth: 6.8%

Ally Financial Inc.'s 6.8% insurance growth is driven by increasing demand for digital insurance products, expansion into new markets, and strategic partnerships. Additionally, the company's focus on customer experience, competitive pricing, and a wide range of insurance offerings have contributed to its growth.

Corporate Finance

Expected Growth: 7.2%

Ally Financial Inc.'s 7.2% growth in Corporate Finance is driven by increasing demand for auto financing, strategic partnerships, and expansion into new markets. Additionally, the company's digital transformation efforts, cost savings initiatives, and strong risk management practices have contributed to its growth.

Corporate and Other

Expected Growth: 6.2%

Ally Financial Inc.'s Corporate and Other segment growth of 6.2% is driven by increasing investment income, growth in Ally Invest brokerage accounts, and expansion of its digital offerings. Additionally, the company's cost savings initiatives and improved operational efficiency also contributed to the segment's growth.

Mortgage Finance

Expected Growth: 7.5%

Ally Financial Inc.'s 7.5% growth in Mortgage Finance is driven by increasing demand for home purchases and refinancing, low interest rates, and government-backed loan programs. Additionally, Ally's digital platform and expanded broker network have improved customer access and experience, contributing to the segment's growth.

7. Detailed Products

Auto Finance

Ally Financial Inc. provides financing for new and used vehicles, including cars, trucks, and SUVs, through its network of dealerships and online platforms.

Home Loans

Ally Financial Inc. offers a range of home loan products, including mortgages, refinancing, and home equity loans, to help customers achieve their homeownership goals.

Online Banking

Ally Financial Inc. provides online banking services, including checking and savings accounts, CDs, and IRAs, with competitive rates and no monthly maintenance fees.

Investment and Brokerage Services

Ally Financial Inc. offers investment and brokerage services, including self-directed trading, investment advice, and retirement accounts, through its Ally Invest platform.

Corporate Finance

Ally Financial Inc. provides corporate finance services, including capital markets, treasury services, and asset-based lending, to businesses and corporations.

8. Ally Financial Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Ally Financial Inc. operates in a highly competitive industry, but the threat of substitutes is mitigated by the company's strong brand recognition and customer loyalty.

Bargaining Power Of Customers

Ally Financial Inc. has a large customer base, but customers have significant bargaining power due to the availability of alternative financial services providers.

Bargaining Power Of Suppliers

Ally Financial Inc. has a diversified supplier base, and suppliers have limited bargaining power due to the company's large scale of operations.

Threat Of New Entrants

The threat of new entrants in the financial services industry is moderate, as there are significant barriers to entry, including regulatory hurdles and capital requirements.

Intensity Of Rivalry

The financial services industry is highly competitive, with many established players competing for market share, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	59.51%
Debt Cost	10.85%
Equity Weight	40.49%
Equity Cost	10.85%
WACC	10.85%
Leverage	146.98%

11. Quality Control: Ally Financial Inc. passed 3 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

OneMain Holdings

A-Score: 6.6/10

Value: 5.5

Growth: 5.4

Quality: 5.2

Yield: 10.0

Momentum: 7.0

Volatility: 6.7

1-Year Total Return ->

FirstCash

A-Score: 6.3/10

Value: 4.1

Growth: 7.6

Quality: 6.4

Yield: 2.0

Momentum: 9.5

Volatility: 8.0

1-Year Total Return ->

SLM

A-Score: 6.1/10

Value: 7.1

Growth: 5.6

Quality: 6.8

Yield: 4.0

Momentum: 7.0

Volatility: 6.0

1-Year Total Return ->

Western Union

A-Score: 6.0/10

Value: 7.4

Growth: 3.1

Quality: 6.2

Yield: 10.0

Momentum: 2.0

Volatility: 7.3

1-Year Total Return ->

Nelnet

A-Score: 5.8/10

Value: 4.9

Growth: 5.2

Quality: 5.3

Yield: 2.0

Momentum: 8.0

Volatility: 9.3

1-Year Total Return ->

Ally Financial

A-Score: 5.6/10

Value: 6.6

Growth: 5.1

Quality: 3.1

Yield: 6.0

Momentum: 6.0

Volatility: 6.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

59.25%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.85%

Ally Financial Inc. - US02005N1000

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on ALLY

1.c. Company Highlights

Lower Quality

Strong Momentum

Average Growth

Earnings Beats

Revenues Beats

Stable Momentum

Medium Volatility

Revenues Miss

Weak Momentum

Higher Growth

Fairly Valued

Average Yield

2. Ally Financial's Strategic Refresh Delivers Solid Results

Segment Performance

Outlook and Guidance

Valuation and Return Metrics

Capital Management and Buybacks

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.62%)

6. Segments

Automotive Finance

Expected Growth: 6.5%

Insurance

Expected Growth: 6.8%

Corporate Finance

Expected Growth: 7.2%

Corporate and Other

Expected Growth: 6.2%

Mortgage Finance

Expected Growth: 7.5%

7. Detailed Products

Auto Finance

Home Loans

Online Banking

Investment and Brokerage Services

Corporate Finance

8. Ally Financial Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Ally Financial Inc. passed 3 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

42.14$

Current Price

42.14$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA