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Today we’re going to take a look at the well-established Discover Financial Services (NYSE:DFS). The company’s stock saw a decent share price growth in the teens level on the NYSE over the last few months. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Discover Financial Services’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What is Discover Financial Services worth?
Great news for investors – Discover Financial Services is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $127.48, but it is currently trading at US$77.45 on the share market, meaning that there is still an opportunity to buy now. However, given that Discover Financial Services’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Discover Financial Services generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 3.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Discover Financial Services, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since DFS is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DFS for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DFS. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Discover Financial Services. You can find everything you need to know about Discover Financial Services in the latest infographic research report. If you are no longer interested in Discover Financial Services, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.