Critical Survey: Bread Financial (NYSE:BFH) and PROG (NYSE:PRG)

PROG (NYSE:PRG) and Bread Financial (NYSE:BFH) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, institutional ownership, valuation and dividends.

Risk and Volatility

PROG has a beta of 1.79, meaning that its share price is 79% more volatile than the S&P 500. Comparatively, Bread Financial has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500.

Dividends

PROG pays an annual dividend of $0.56 per share and has a dividend yield of 1.3%. Bread Financial pays an annual dividend of $0.92 per share and has a dividend yield of 0.8%. PROG pays out 15.5% of its earnings in the form of a dividend. Bread Financial pays out 7.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. PROG has raised its dividend for 2 consecutive years. PROG is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares PROG and Bread Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PROG	$2.41 billion	0.70	$146.79 million	$3.62	11.77
Bread Financial	$4.70 billion	0.93	$518.00 million	$12.82	8.83

Bread Financial has higher revenue and earnings than PROG. Bread Financial is trading at a lower price-to-earnings ratio than PROG, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

97.9% of PROG shares are owned by institutional investors. Comparatively, 99.5% of Bread Financial shares are owned by institutional investors. 3.7% of PROG shares are owned by insiders. Comparatively, 1.3% of Bread Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings for PROG and Bread Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PROG	0	3	6	1	2.80
Bread Financial	1	6	8	0	2.47

PROG presently has a consensus price target of $49.44, suggesting a potential upside of 16.05%. Bread Financial has a consensus price target of $110.58, suggesting a potential downside of 2.33%. Given PROG’s stronger consensus rating and higher possible upside, research analysts clearly believe PROG is more favorable than Bread Financial.

Profitability

This table compares PROG and Bread Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PROG	5.57%	21.88%	9.15%
Bread Financial	11.95%	18.42%	2.76%

Summary

PROG beats Bread Financial on 10 of the 18 factors compared between the two stocks.

About PROG

PROG Holdings, Inc. (NYSE:PRG) is a financial technology holding company based in Salt Lake City, Utah with three business segments: Progressive Leasing, which offers lease-to-own transactions primarily to credit-challenged consumers through e-commerce and point-of-sale retail partners, via online, mobile, and in-store solutions; Vive Financial, which provides consumers who may not qualify for traditional prime lending with a variety of second-look, revolving credit products through private label and branded credit cards; and Four Technologies, which provides consumers of all credit backgrounds Buy Now, Pay Later (BNPL) options through four interest-free installments via its platform, Four.

About Bread Financial

Bread Financial Holdings, Inc. provides tech-forward payment and lending solutions to customers and consumer-based industries in North America. It offers credit card and other loans financing services, including risk management solutions, account origination, and funding services for private label and co-brand credit card programs, as well as through Bread partnerships; and Comenity-branded general purpose cash-back credit. The company also manages and services the loans it originates for private label, co-brand, and general-purpose credit card programs, and installment loans and split-pay products; and provides marketing, and data and analytics services. In addition, it offers an enhanced digital suite that includes a unified software development kit, which provides access to its suite of products, as well as promotes credit payment options earlier in the shopping experience. Further, the company through Bread, a digital payments platform and robust suite of application programming interfaces allows merchants and partners to integrate online point-of-sale financing and other digital payment products. It offers its products under the Bread CashbackTM, Bread PayTM, and Bread SavingsTM brands. The company was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in March 2022. Bread Financial Holdings, Inc. was incorporated in 1995 and is headquartered in Columbus, Ohio.