Ally Financial Inc. (ALLY) Stock Analysis
Ally Financial Inc. (ALLY) Stock Analysis
Overall Grade: F (Concerning)
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Ally Financial Inc. faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 8.5% | Near cost of capital |
| FCF Margin | 47.3% | Strong cash generation |
| Debt/Equity | 1.4x | Moderate leverage |
Investment Thesis: Healthy free cash flow margin of 47.3% provides financial flexibility for growth and shareholder returns.
What is Ally Financial Inc.'s Profitability and ROIC?
Ally Financial Inc.'s return on invested capital of 8.5% is around industry norms. Gross margin of 100.0% with operating margin at 29.9% reflects the company's strong market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 8.5% | Adequate | Adequate returns |
| Return on Equity (ROE) | 3.0% | Warning | Moderate equity returns |
| Gross Margin | 100.0% | Excellent | Strong pricing power |
| Operating Margin | 29.9% | Excellent | Efficient operations |
How Strong is Ally Financial Inc.'s Cash Flow Quality?
Ally Financial Inc. generated $3.7B in free cash flow over the trailing twelve months, representing a 47.3% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 8.5x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 47.3% | Excellent | Excellent cash conversion |
| Free Cash Flow (TTM) | $3.7B | Good | Positive cash generation |
| OCF/Net Income | 8.5x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Ally Financial Inc.'s Financial Health?
Ally Financial Inc.'s debt-to-equity ratio of 1.4x indicates moderate leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 1.4x | Adequate | Moderate leverage |
| Net Cash Position | $-8.2B | Warning | Net debt position |
Is Ally Financial Inc. Stock Overvalued or Undervalued?
Ally Financial Inc. trades at a P/E of 37.5x, representing a premium to the sector median of N/A.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 37.5x | Adequate | Premium valuation |
| EV/Sales | 2.6x | Good | Attractive revenue multiple |
| Dividend Yield | 3.1% | Adequate | Meaningful income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 8.5% | Bottom 50% | 0.9x below |
| Free Cash Flow Margin | 47.3% | Top 25% | 2.1x above |
| Gross Margin | 100.0% | Top 50% | 1.0x at |
| Operating Margin | 29.9% | Top 50% | 1.0x above |
| Return on Equity (ROE) | 3.0% | Bottom 25% | 0.3x below |
| P/E Ratio | 37.5x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 8.5% (Adequate - Bottom 50% of sector (median: 9.2%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 47.3% (Excellent - Top 25% of sector (median: 22.2%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 100.0% (Excellent - Top 50% of sector (median: 100.0%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 135.6% (Adequate)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 37.5x (Adequate)
Frequently Asked Questions
Q: What is Ally Financial Inc.'s Return on Invested Capital (ROIC)?
Ally Financial Inc. (ALLY) has a trailing twelve-month Return on Invested Capital (ROIC) of 8.5%. This compares below the sector median of 9.2%. An ROIC near 8-12% is approximately the cost of capital for most companies.
Q: What is Ally Financial Inc.'s Free Cash Flow Margin?
Ally Financial Inc. (ALLY) has a free cash flow margin of 47.3%, generating $3.7 billion in free cash flow over the trailing twelve months. A FCF margin above 20% indicates excellent cash conversion and a high-quality business model.
Q: Is Ally Financial Inc. stock overvalued or undervalued?
Ally Financial Inc. (ALLY) trades at a P/E ratio of 37.5x, which is above the sector median of N/A. The EV/Sales multiple is 2.6x.
Q: Does Ally Financial Inc. pay a dividend?
Ally Financial Inc. (ALLY) currently pays a dividend yield of 3.1%. This yield is moderate, suggesting a balance between income and growth reinvestment.
Q: How much debt does Ally Financial Inc. have?
Ally Financial Inc. (ALLY) has a debt-to-equity ratio of 1.4x with total debt of $19.7 billion. Net debt position is $8.2 billion.
Q: How does Ally Financial Inc. compare to competitors in Financials?
Compared to other companies in Financials, Ally Financial Inc. (ALLY) shows: ROIC of 8.5% is below the sector median of 9.2% (Bottom 46%). FCF margin of 47.3% exceeds the sector median of 22.2% (Top 14% of sector). Gross margin at 100.0% is 0 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Financials companies with available SEC filings.
Q: What warning signs should I watch for with Ally Financial Inc.?
Ally Financial Inc. (ALLY) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-10-30. TTM metrics as of Q2 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.