Discover Delivers Impressive Revenue Growth in Q3, but Higher Credit Costs Are an Offset

Narrow-moat-rated Discover Financial reported decent third-quarter results as strong loan growth was offset by higher credit costs. Discover’s net revenue increased 25% year over year and 7.9% sequentially to $3.48 billion. Earnings per share were flat from last year at $3.54, which translates to a return on equity of 29%. As we incorporate these results, we are maintaining our $142 fair value estimate for Discover, and we see the shares as undervalued at current prices.