Is this is a value trap or an opportunity? With ~50% credit sales conversion as receivable and new verticals growing at ~10% yoy, even with $18 true EPS this year (10% drop), this is trading at 13% earning yield. Even a 20% ROE gives 6% EPS growth with just over 30% reinvestment. PE multiple of 12 gives 15% IRR.
Even if the card revenue drops considerable, like (1) sales/receivable drops – reduced carry balance? Smart consumer? (2) new verticals signing plus sales growth stalls or drops? (3) increased default rate? However, I’m not certain these are the likely events given the way IKEA, Ulta and new vertical sales are growing, with all a proprietary AI and data mining expertise this company has, this seems to be a safe 10% yield financials even without any growth.