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Discover Financial Services DFS

Morningstar Rating
$102.33 +1.63 (1.62%)
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Company Report

Discover Is Benefiting From High Loan Growth, but Credit Costs Are Set to Rise

As consumer debt repayment rates in the United States normalize, Discover is enjoying a period of significant loan growth. On the other hand, while credit costs had initially normalized slower from historic lows than we had initially expected, they have increased materially in the first of 2023 and we expect them to rise further as we head into 2024. We do not expect this to put any pressure on the bank's balance sheet, though, as the firm is in a strong financial position with good reserves. Additionally, Discover's net interest income will benefit from a larger credit card receivable base now that growth has returned. The bank ended June 2023 with just under than $94 billion in credit card loans, 18.6% higher than the prior year.

Price vs Fair Value

DFS is trading at a 33% discount.
Price
$102.33
Fair Value
$594.00
Uncertainty
High
1-Star Price
$347.40
5-Star Price
$55.70
Economic Moat
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Capital Allocation
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Bulls Say, Bears Say

Bulls

Discover has consistently been able to generate returns on equity that are among the highest of its peers.

Bears

Discover is subject to the same competitive rewards environment as other credit card issuers. Its rewards rate has climbed over time and is likely to continue to do so.

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News

Trading Information

Previous Close Price
$100.70
Day Range
$101.18102.54
52-Week Range
$79.04122.50
Bid/Ask
$102.01 / $102.51
Market Cap
$25.59 Bil
Volume/Avg
2.2 Mil / 2.3 Mil

Key Statistics

Price/Earnings (Normalized)
7.59
Price/Sales
1.73
Dividend Yield
2.64%
Dividend Yield (Forward)
2.64%
Total Yield
12.51%

Company Profile

Discover Financial Services is a bank operating in two distinct segments: direct banking and payment services. The company issues credit and debit cards and provides other consumer banking products including deposit accounts, students loans, and other personal loans. It also operates the Discover, Pulse, and Diners Club networks. The Discover network is the fourth-largest payment network in the United States as ranked by overall purchase volume, and Pulse is one of the largest ATM networks in the country.
Sector
Financial Services
Industry
Credit Services
Stock Style Box
Mid Value
Total Number of Employees
20,200

Competitors

Valuation

Metric
DFS
MA
COF
Price/Earnings (Normalized)
7.5935.228.67
Price/Book Value
1.9461.470.82
Price/Sales
1.7316.151.22
Price/Cash Flow
3.2428.962.26
Price/Earnings
DFS
MA
COF

Financial Strength

Metric
DFS
MA
COF
Quick Ratio
0.79
Current Ratio
1.17
Interest Coverage
25.20
Quick Ratio
DFS
MA
COF

Profitability

Metric
DFS
MA
COF
Return on Assets (Normalized)
2.69%28.80%1.09%
Return on Equity (Normalized)
27.23%187.39%9.43%
Return on Invested Capital (Normalized)
55.08%
Return on Assets
DFS
MA
COF

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COF
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SYF
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SOFI
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WU
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