What Happened

Synchrony Financial (SYF -1.33%) bounced back in July, as its stock price rose 21.1% in the month, according to S&P Global Market Intelligence. It bested both the S&P 500, up 9.1% in July, and the Nasdaq Composite, up 12.4% for the month. Synchrony is still down about 28% year to date, as of Aug. 2.

So what

Synchrony Financial is one of the leading providers of store cards -- those that can be used only for purchases at a particular store or retailer. The cards are branded with the name of the retailer, but Synchrony lends the money for the purchases and collects the interest on payments.

The company has cards with more than 100 partners, including the e-commerce giant, Amazon.com (AMZN -1.45%). If you have an Amazon store card, you're paying your bills to Synchrony.

Synchrony posted strong results in the second quarter, which drove the stock price higher. Synchrony beat earnings estimates with net earnings of $804 million and earnings per share of $1.61, which was higher than the expected $1.43 in earnings per share (EPS).

The big driver was net interest income, which was up 15% year over year to $3.8 billion. The net interest margin increased 182 basis points to 15.6%, driven by higher interest rates.

But it wasn't just interest rates, as consumer spending has remained stable, despite the drag caused by high inflation. Synchrony saw purchase volume increase 12% in the quarter year over year to $47.2 billion, while loans were up 5% and active accounts grew by 4% year over year.

Now what

Synchrony also got a lift late in the month when its partner, Amazon, posted better-than-expected earnings, with revenue up 7% year over year. Even better, Amazon posted guidance for the third quarter and projected net sales to increase 13% to 17% year over year in the quarter. That is also in a range that's higher than analysts anticipated. This is good news for the company, as it should help boost loan activity and purchase volumes. 

As for Synchrony, Chief Financial Officer Brian Wenzel said on the earnings call that the company is projecting 10% year-over-year growth in loan receivables in 2022. Net interest margin is expected to remain high at 15.5% at the end of the year, and the net charge-off ratio is projected to be at 3.15%.

Synchrony is very cheap right now, with a forward price-to-earnings (P/E) ratio of just under 6. Given its prospects, it's worth considering.