This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Discover: PayPal Winner

Stocks in this article: BAC C JPM EBAY DFS COF AXP

Discover's net charge-off rate during July for managed card balances was 2.22%, improving from 2.40% in June. American Express's net loss rate for cards declined to 1.95% in July, from 2.18% the previous month.

Capital One Financial (COF) reported that the net loss rate for its managed card balances rose to 2.91% in July, from 2.72% in June. Citigroup (C - Get Report) unit Citibank's credit card master trust reported a July charge-off rate of 4.28%, increasing from 3.74%, while JPMorgan Chase (JPM - Get Report) unit Chase Issuance Trust saw net charge-offs increase to 4.58% in July, from 3.71% in June.

Bringing up the rear was Bank of America (BAC - Get Report), with its credit card trust reporting a July loss rate of 5.05%, increasing only slightly from 5.04% in June.

Since July card trust data wasn't yet available for all of the large card lenders, Hagerman compared the July 31 master trust card portfolios to balances at the end of June 2011. Over that 13-month period, all six of the card lenders in the report saw total managed credit card receivables in master trusts decline. Bank of America showed the largest decline of 15%, to $61.1 billion, while Discover showed the 13-month smallest decline, of 1.5%, to $32.8 billion.

Discover's shares have now returned a stellar 61% year-to-date, following a 31% return during 2011. That is a remarkable run by any standard, especially when you consider that the S&P 500 Index (SPX.X) was flat for 2011, while the KBW Bank Index (I:BKX) declined 25%.

The shares trade for 2.4 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.6 times the consensus fiscal 2013 earnings estimate of $3.99, among analysts polled by Thomson Reuters. The consensus EPS estimate for fiscal 2012 is $4.20. Discover's fiscal year ends on Nov. 30.

While Discover's price-to-tangible-book ratio may seem high in the current environment, with Citigroup and Bank of America trading for roughly 0.6 times tangible book value, while JPMorgan trades for 1.1 times tangible book, the company's very strong earnings track record justifies its valuation, and then some.

Discover's operating returns on average equity (ROE) have ranged between 24.21% and 33.42% over the past four quarters, according to Thomson Reuters Bank Insight. Bank of America -- saddled by its legacy mortgage mess springing from the disastrous purchase of Countrywide in 2008 - has seen its ROE over the past four quarters range from 1.12% to 11.21%. Citigroup's ROE has ranged from 2.18% to 8.41%.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs