NYSE:DFS

Stock Analysis Report

NOT FOR DISTRIBUTION
Header cover image

Executive Summary

Discover Financial Services, through its subsidiaries, operates as a direct banking and payment services company in the United States.


Snowflake Analysis

Established dividend payer with moderate growth potential.


Similar Companies

Share Price & News

How has Discover Financial Services's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: DFS's share price has been volatile over the past 3 months.


Market Performance


7 Day Return

13.1%

DFS

6.9%

US Consumer Finance

2.8%

US Market


1 Year Return

-35.5%

DFS

-26.1%

US Consumer Finance

9.3%

US Market

Return vs Industry: DFS underperformed the US Consumer Finance industry which returned -26.1% over the past year.

Return vs Market: DFS underperformed the US Market which returned 9.3% over the past year.


Shareholder returns

DFSIndustryMarket
7 Day13.1%6.9%2.8%
30 Day20.5%10.2%8.9%
90 Day-25.3%-20.1%-0.5%
1 Year-33.6%-35.5%-24.6%-26.1%11.8%9.3%
3 Year-9.0%-15.1%6.5%1.1%31.4%22.7%
5 Year-3.5%-13.6%1.0%-6.9%58.7%40.9%

Price Volatility Vs. Market

How volatile is Discover Financial Services's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Discover Financial Services undervalued compared to its fair value and its price relative to the market?

7.39x

Price to Earnings (PE) ratio


Share Price vs. Fair Value

Below Fair Value: DFS ($49.84) is trading above our estimate of fair value ($44.47)

Significantly Below Fair Value: DFS is trading above our estimate of fair value.


Price To Earnings Ratio

PE vs Industry: DFS is poor value based on its PE Ratio (7.4x) compared to the Consumer Finance industry average (5.6x).

PE vs Market: DFS is good value based on its PE Ratio (7.4x) compared to the US market (15.7x).


Price to Earnings Growth Ratio

PEG Ratio: DFS is good value based on its PEG Ratio (0.1x)


Price to Book Ratio

PB vs Industry: DFS is overvalued based on its PB Ratio (1.7x) compared to the US Consumer Finance industry average (0.9x).


Next Steps

Future Growth

How is Discover Financial Services forecast to perform in the next 1 to 3 years based on estimates from 19 analysts?

50.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: DFS's forecast earnings growth (50.7% per year) is above the savings rate (2.2%).

Earnings vs Market: DFS's earnings (50.7% per year) are forecast to grow faster than the US market (22% per year).

High Growth Earnings: earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: DFS's revenue (4.1% per year) is forecast to grow slower than the US market (8.8% per year).

High Growth Revenue: DFS's revenue (4.1% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: DFS's Return on Equity is forecast to be low in 3 years time (19.5%).


Next Steps

Past Performance

How has Discover Financial Services performed over the past 5 years?

4.5%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: DFS has high quality earnings.

Growing Profit Margin: DFS's current net profit margins (28.9%) are lower than last year (35.2%).


Past Earnings Growth Analysis

Earnings Trend: DFS's earnings have grown by 4.5% per year over the past 5 years.

Accelerating Growth: DFS's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: DFS had negative earnings growth (-22.7%) over the past year, making it difficult to compare to the Consumer Finance industry average (-21.4%).


Return on Equity

High ROE: Whilst DFS's Return on Equity (22.45%) is high, this metric is skewed due to their high level of debt.


Next Steps

Financial Health

How is Discover Financial Services's financial position?


Financial Position Analysis

Short Term Liabilities: DFS's short term assets ($98.3B) exceed its short term liabilities ($81.6B).

Long Term Liabilities: DFS's short term assets ($98.3B) exceed its long term liabilities ($21.4B).


Debt to Equity History and Analysis

Debt Level: DFS's debt to equity ratio (270.1%) is considered high.

Reducing Debt: DFS's debt to equity ratio has increased from 206.6% to 270.1% over the past 5 years.

Debt Coverage: DFS's debt is well covered by operating cash flow (21.2%).

Interest Coverage: Insufficient data to determine if DFS's interest payments on its debt are well covered by EBIT.


Balance Sheet


Next Steps

Dividend

What is Discover Financial Services's current dividend yield, its reliability and sustainability?

3.53%

Current Dividend Yield


Dividend Yield vs Market

Notable Dividend: DFS's dividend (3.53%) is higher than the bottom 25% of dividend payers in the US market (1.69%).

High Dividend: DFS's dividend (3.53%) is low compared to the top 25% of dividend payers in the US market (4.55%).


Stability and Growth of Payments

Stable Dividend: DFS's dividends per share have been stable in the past 10 years.

Growing Dividend: DFS's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its reasonably low payout ratio (25.5%), DFS's dividend payments are well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: DFS's dividends in 3 years are forecast to be well covered by earnings (26.1% payout ratio).


Next Steps

Management

How experienced are the management team and are they aligned to shareholders interests?

1.8yrs

Average management tenure


CEO

Roger Hochschild (54yo)

1.67yrs

Tenure

US$9,250,436

Compensation

Mr. Roger Crosby Hochschild serves as the President and Chief Executive Officer for Discover Financial Services Since 1st October, 2018 and serves as Chief Executive Officer and President at Discover Bank  ...


CEO Compensation Analysis

Compensation vs Market: Roger's total compensation ($USD9.25M) is about average for companies of similar size in the US market ($USD11.64M).

Compensation vs Earnings: Roger's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.


Leadership Team

NamePositionTenureCompensationOwnership
Roger Hochschild
CEO, President & Director1.67yrsUS$9.25m0.11% $16.2m
John Greene
Executive VP & CFO0.75yrUS$1.93m0.0014% $221.4k
Wanjiku Walcott
Executive VP0.92yrUS$10.40m0.0011% $169.5k
Diane Offereins
Executive VP & President of Payment Services10.17yrsUS$3.88m0.038% $5.8m
Julie Loeger
Executive VP & President of US Cards4.5yrsUS$3.88m0.015% $2.4m
Edward McGrogan
Chief Accounting Officer7.5yrsno data0.0046% $706.8k
Amir Arooni
Executive VP & Chief Information Officer0.25yrno data0.0060% $923.6k
R. Eichfeld
Executive VP and Chief HR & Administrative Officer1.75yrsno data0.011% $1.7m
Craig Streem
Vice President of Investor Relationsno datano datano data
Leslie Sutton
Vice President of Corporate Communications7.33yrsno datano data

1.8yrs

Average Tenure

54yo

Average Age

Experienced Management: DFS's management team is not considered experienced ( 1.8 years average tenure), which suggests a new team.


Board Members

NamePositionTenureCompensationOwnership
Roger Hochschild
CEO, President & Director1.67yrsUS$9.25m0.11% $16.2m
Mary Bush
Independent Director13yrsUS$279.99k0.019% $2.9m
Joseph Eazor
Independent Director4.42yrsUS$274.99k0.0031% $470.2k
Jeffrey Aronin
Independent Director13yrsUS$264.99k0.023% $3.6m
Mark Thierer
Independent Director7.17yrsUS$264.99k0.0065% $990.8k
Thomas Maheras
Independent Chairman0.083yrUS$274.99k0.019% $2.8m
Gregory Case
Independent Director13yrsUS$279.99k0.023% $3.6m
Michael Moskow
Independent Director12.75yrsUS$284.99k0.018% $2.7m
Cynthia Glassman
Independent Director11.33yrsUS$284.99k0.015% $2.3m
Candace Duncan
Independent Director6.08yrsUS$279.99k0.0055% $842.7k

9.3yrs

Average Tenure

57.5yo

Average Age

Experienced Board: DFS's board of directors are considered experienced (9.3 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: DFS insiders have bought more shares than they have sold in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Top Shareholders

Company Information

Discover Financial Services's company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Discover Financial Services
  • Ticker: DFS
  • Exchange: NYSE
  • Founded: 1986
  • Industry: Consumer Finance
  • Sector: Diversified Financials
  • Market Cap: US$15.266b
  • Shares outstanding: 306.30m
  • Website: https://www.discover.com

Number of Employees


Location

  • Discover Financial Services
  • 2500 Lake Cook Road
  • Riverwoods
  • Illinois
  • 60015
  • United States

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
DFSNYSE (New York Stock Exchange)YesCommon StockUSUSDJun 2007
DC7DB (Deutsche Boerse AG)YesCommon StockDEEURJun 2007
0IBCLSE (London Stock Exchange)YesCommon StockGBUSDJun 2007
DFS *BMV (Bolsa Mexicana de Valores)YesCommon StockMXMXNJun 2007
D1FS34BOVESPA (Bolsa de Valores de Sao Paulo)BDR EACH 2 REPR 1 SHS UNSPONBRBRLJan 2020

Biography

Discover Financial Services, through its subsidiaries, operates as a direct banking and payment services company in the United States. The Direct Banking segment offers Discover-branded credit cards to individuals; and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending, as well as deposit products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, and individual retirement arrangement certificates of deposit. The Payment Services segment operates the PULSE network, an automated teller machine, debit, and electronic funds transfer network; Diners Club International, a payments network that issues Diners Club branded charge cards and provides card acceptance services; and Discover Network that processes transactions for Discover-branded credit and debit cards, as well as provides payment transaction processing and settlement services. The company was incorporated in 1986 and is based in Riverwoods, Illinois. 


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2020/06/02 03:45
End of Day Share Price2020/06/01 00:00
Earnings2020/03/31
Annual Earnings2019/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.