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9 Consumer Finance Stock Plays From eBay to Capital One

3. Discover Financial Services
Shares of Discover Financial Services closed at $39.71 Thursday, returning 66% year-to-date, following a 315% return last year.

The shares trade for 9.5 times the consensus 2013 EPS estimate of $4.18.

Sakhrani's price target of $48 implies upside of 21% for the shares.

Discover on Thursday reported earnings of $627 million, or $1.21 a share, for its fiscal third quarter ended Aug. 31, increasing from $537 million, or $1.01 a share, the previous quarter, and $642 million, or $1.18 a share, a year earlier.

The sequential earnings improvement reflected a $182 million release of loan loss reserves during the fiscal third quarter. During the previous quarter, the company released $110 million in reserves.

While earnings were down slightly from a year earlier, earnings-per-share were up, because of the company's share repurchases. Discover bought back roughly 10 million shares for $350 million during the fiscal third quarter. Total shares outstanding declined by 1.9% during the quarter.

Sakhrani estimates that Discover's EPS for fiscal 2012 will be $4.42, followed by EPS of $4.16 in fiscal 2013.

DFS Chart DFS data by YCharts

Interested in more on Discover Financial Services? See TheStreet Ratings' report card for this stock.

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