On Jul 8, 2013, the shares of
Discover Financial Services
) reached a new 52-week high of $50.74, driven by the fundamental
strength of the company. This Zacks Rank #2 (Buy) company
witnessed a positive earnings surprise of 18.75% in the first
quarter of 2013.
Discover Financial follows an inorganic route to fortify its
growth profile. The company regularly announces acquisitions and
alliances to expand its business and boost earnings. So far in
2013, the company inked agreements with Barclaycard Global
Payment Acceptance, Japan Credit Bureau, Cadence Bank and
Nigeria-based Interswitch Limited to boost card acceptances and
Discover Financial also reduced its fixed rate on student
loans to attract more students, thus boosting the income of the
Direct Banking segment. The company continues to launch new
products tailored to specific customer needs in order to attract
Further, Discover Financial has implemented several capital
bolstering initiatives, including equity and debt offerings,
which have helped the company achieve a strong capital base. The
healthy capital and cash position facilitates efficient
deployment of excess capital.
The valuation of Discover Financial looks fair. The shares are
currently trading at an 11.2% premium to the peer group average
on a forward price-to-earnings basis and a 21.4% premium to the
peer group average on a price-to-book basis. However, its return
on equity is 16.5% higher than the peer group average. Further,
the year to date return from the stock is 30.1%, above S&P's
return of 15.0%.
Some other companies in the financial sector that are doing
well and are worth a look are
Capital One Financial Corp.
World Acceptance Corp.
Regional Management Corp.
). All these companies carry a Zacks Rank #2 (Buy).
CAPITAL ONE FIN (COF): Free Stock Analysis
DISCOVER FIN SV (DFS): Free Stock Analysis
REGIONAL MANAGE (RM): Free Stock Analysis
WORLD ACCEPTANC (WRLD): Free Stock Analysis
To read this article on Zacks.com click here.