EZCORP (NASDAQ: EZPW) and Discover Financial Services (NYSE:DFS) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.

Dividends

Discover Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 2.0%. EZCORP does not pay a dividend. Discover Financial Services pays out 20.7% of its earnings in the form of a dividend. Discover Financial Services has increased its dividend for 6 consecutive years.

Volatility and Risk

EZCORP has a beta of 1.98, meaning that its stock price is 98% more volatile than the S&P 500. Comparatively, Discover Financial Services has a beta of 1.46, meaning that its stock price is 46% more volatile than the S&P 500.

Profitability

This table compares EZCORP and Discover Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EZCORP 3.16% 3.65% 2.29%
Discover Financial Services 20.91% 21.28% 2.46%

Earnings & Valuation

This table compares EZCORP and Discover Financial Services’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
EZCORP $750.47 million 0.64 $67.71 million $0.44 20.00
Discover Financial Services $7.17 billion 3.09 $2.16 billion $5.79 10.26

Discover Financial Services has higher revenue and earnings than EZCORP. Discover Financial Services is trading at a lower price-to-earnings ratio than EZCORP, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

87.4% of EZCORP shares are held by institutional investors. Comparatively, 86.2% of Discover Financial Services shares are held by institutional investors. 2.1% of EZCORP shares are held by insiders. Comparatively, 1.0% of Discover Financial Services shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and price targets for EZCORP and Discover Financial Services, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EZCORP 0 3 1 0 2.25
Discover Financial Services 1 7 16 0 2.63

EZCORP presently has a consensus price target of $9.25, indicating a potential upside of 5.11%. Discover Financial Services has a consensus price target of $73.89, indicating a potential upside of 24.33%. Given Discover Financial Services’ stronger consensus rating and higher possible upside, analysts clearly believe Discover Financial Services is more favorable than EZCORP.

Summary

Discover Financial Services beats EZCORP on 12 of the 17 factors compared between the two stocks.

About EZCORP

EZCORP, Inc. provides pawn loans in the United States and Mexico, and consumer loans in Mexico. The Company operates through three segments: U.S. Pawn, which includes its EZPAWN, Value Pawn & Jewelry and other branded pawn operations in the United States; Mexico Pawn, which includes its Empeno Facil pawn operations and cash converters buy/sell store operations in Mexico, and Other International, which includes its CASHMAX financial services operations in Canada and its equity interest in Cash Converters International. It offers pawn loans, which are non-recourse loans, collateralized by tangible property, and it sells merchandise, primarily collateral forfeited from pawn lending operations and used merchandise purchased from customers at its pawn stores.

About Discover Financial Services

Discover Financial Services (DFS) is a direct banking and payment services company. The Company is a bank holding company, as well as a financial holding company. The Company operates through two segments: Direct Banking and Payment Services. It provides direct banking products and services, and payment services through its subsidiaries. It offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company’s Direct Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer banking products and services. The Company’s direct banking offers credit cards, student loans, personal loans, home equity loans, and other consumer lending and deposit products. The Payment Services segment includes PULSE, Diners Club and the Company’s Network Partners business.

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