Highlights

  • One-year basic EPS growth is 28.86%, with a P/E of 8.02 and PEG of -0.45.
  • Third quarter net income was $156 million, against $188 million a year earlier.
  • Credit sales were $7.4 billion in the third quarter, up 9%.
  • Bread Financial repurchased 0.7 million shares for $75 million; $374 million remains authorized.

One-year earnings growth of 28.86%, paired with a trailing twelve-month P/E of 8.02 and an expected-basis PEG of -0.45, puts Bread Financial (NYSE:BFH) among undervalued growth stocks, with shares trading at USD 105.35 on October 28, 2026, up 2.67%. On the company's side, the credit card and payment solutions provider issued $135 million of Series B preferred stock in May, received regulatory approval for its bank merger on July 31, completed that merger on October 1, and reported third quarter 2026 net income of $156 million in a Form 10-Q filed October 27.

Based in Columbus, Ohio, and incorporated in Delaware, Bread Financial describes itself as a tech-forward financial services company offering payment, lending and saving solutions to millions of U.S. consumers. It provides co-brand and private label credit cards, pay-over-time products and general purpose credit cards and saving products. It operates through a single reportable segment, and offers credit products through its insured depository institution subsidiaries, Comenity Bank and Comenity Capital Bank.

Growth: Third Quarter Earnings, Credit Sales and Loan Balances

Net income was $156 million in the third quarter against $188 million a year earlier, and $483 million for the nine months against $464 million. Net income available to common stockholders was $150 million against $188 million. Basic earnings per common share were $3.91 against $4.04, and diluted earnings per common share were $3.82 against $3.96. For the nine months, diluted earnings per share were $11.54 against $9.65.

Total net interest and non-interest income was $1,017 million against $971 million, up 5%. Credit sales of $7.4 billion rose 9%, which the company attributed to growth in both new and existing brand partners and increased general-purpose spending. Average credit card and other loans rose 6% to $18.6 billion, and end-of-period loans rose 7% to $18.9 billion. Net interest margin was 18.89% against 18.81%.

Valuation: P/E of 8.02, PEG of -0.45 and Returns

The P/E ratio of 8.02 is measured on trailing twelve-month earnings, and the PEG ratio of -0.45 on expected growth. Return on average equity was 17.7% against 22.4%, and return on average tangible common equity, a non-GAAP measure, was 23.6% against 28.6%. Book value per common share was $85.23 against $72.08, and tangible book value per common share, also non-GAAP, was $66.95 against $56.36.

Capital Returns, Deposits and Funding

In the third quarter the company repurchased 0.7 million shares for $75 million, leaving $374 million of share repurchase authorization at September 30, 2026. It also repurchased $24 million of its 8.375% subordinated notes due 2035 with cash on hand, with $326 million of principal outstanding. The common equity tier 1 capital ratio was 13.1% against 14.0%, which the company said reflected stock repurchases, dividends, risk-weighted asset growth and debt repurchases more than offsetting net earnings.

The company paid a common dividend of $0.23 per share in the third quarter, and on October 22 declared $0.25 per share on common stock, $21.56 per share on its Series A preferred stock and $22.19 per share on its Series B preferred stock, each payable December 15, 2026. Consumer deposits rose 21% to $9.9 billion. The $700 million Revolving Credit Facility, maturing October 2028, was undrawn at September 30.

Disclosed Risks and Outlook for 2026

Non-interest income decreased $17 million from the third quarter of 2025, which the company linked to higher retailer share arrangements. The provision for credit losses was $321 million against $299 million, including a $21 million reserve build, and net principal losses were $300 million. The company said the benefits of its pricing actions are expected to diminish and that a customer's ability to repay can be affected by inflation and elevated interest rates.

The delinquency rate was 5.57% against 6.04%, the net principal loss rate was 6.40% against 7.39%, and the reserve rate was 11.12% against 11.72%. Litigation tied to the 2021 spinoff of LoyaltyOne includes an Ontario suit by LoyaltyOne, Co. seeking damages of $775 million and actions by the Loyalty Ventures liquidating trustee. The company believes the allegations are without merit and intends to defend the cases.

For full-year 2026, the company now expects average credit card and other loans up approximately 4% from 2025 and total net interest and non-interest income up approximately 5%. It expects a net interest margin slightly higher than 2025, a net principal loss rate below 7%, a normalized effective tax rate of 25% to 27% and positive operating leverage excluding the pretax impacts of debt repurchases. On its October 22 call, management said it expects minimal repurchase activity in the fourth quarter absent a preferred stock offering.