Discover Financial Services (NYSE: DFS) is one of 27 publicly-traded companies in the “Consumer Lending” industry, but how does it contrast to its rivals? We will compare Discover Financial Services to related businesses based off the strength of its valuation, dividends, profitability, analyst recommendations, earnings, institutional ownership and risk.

Dividends

Discover Financial Services pays an annual dividend of $1.40 per share and has a dividend yield of 2.4%. Discover Financial Services pays out 24.2% of its earnings in the form of a dividend. As a group, “Consumer Lending” companies pay a dividend yield of 1.7% and pay out 25.6% of their earnings in the form of a dividend. Discover Financial Services has raised its dividend for 6 consecutive years. Discover Financial Services is clearly a better dividend stock than its rivals, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Discover Financial Services and its rivals gross revenue, earnings per share and valuation.

Gross Revenue EBITDA Price/Earnings Ratio
Discover Financial Services $7.17 billion N/A 9.96
Discover Financial Services Competitors $564.69 million $93.09 million 15.66

Discover Financial Services has higher revenue, but lower earnings than its rivals. Discover Financial Services is trading at a lower price-to-earnings ratio than its rivals, indicating that it is currently the more affordable than other companies in its industry.

Institutional and Insider Ownership

86.2% of Discover Financial Services shares are held by institutional investors. Comparatively, 77.6% of shares of all “Consumer Lending” companies are held by institutional investors. 1.0% of Discover Financial Services shares are held by insiders. Comparatively, 15.2% of shares of all “Consumer Lending” companies are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current ratings and recommmendations for Discover Financial Services and its rivals, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Discover Financial Services 1 7 15 0 2.61
Discover Financial Services Competitors 191 738 1064 58 2.48

Discover Financial Services currently has a consensus price target of $73.61, suggesting a potential upside of 27.66%. All “Consumer Lending” companies have a potential upside of 57.56%. Given Discover Financial Services’ rivals higher probable upside, analysts clearly believe Discover Financial Services has less favorable growth aspects than its rivals.

Profitability

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

Net Margins Return on Equity Return on Assets
Discover Financial Services 20.91% 21.28% 2.46%
Discover Financial Services Competitors -27.86% -17.25% 0.66%

Risk & Volatility

Discover Financial Services has a beta of 1.45, suggesting that its stock price is 45% more volatile than the S&P 500. Comparatively, Discover Financial Services’ rivals have a beta of 1.48, suggesting that their average stock price is 48% more volatile than the S&P 500.

Summary

Discover Financial Services beats its rivals on 9 of the 14 factors compared.

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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