Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of B . The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, notable return on equity and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
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Highlights from the ratings report include:
- Compared to its closing price of one year ago, DFS's share price has jumped by 59.53%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DFS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- Despite its growing revenue, the company underperformed as compared with the industry average of 9.1%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Consumer Finance industry and the overall market, DISCOVER FINANCIAL SVCS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 46.40% is the gross profit margin for DISCOVER FINANCIAL SVCS INC which we consider to be strong. Regardless of DFS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, DFS's net profit margin of 24.50% significantly outperformed against the industry.
- DISCOVER FINANCIAL SVCS INC's earnings per share declined by 8.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DISCOVER FINANCIAL SVCS INC increased its bottom line by earning $4.06 versus $1.22 in the prior year. This year, the market expects an improvement in earnings ($4.20 versus $4.06).
Discover Financial Services, a bank holding company, offers direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services. The company has a P/E ratio of 8.6, equal to the average financial services industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Discover Financial Services has a market cap of $19.09 billion and is part of the
industry. Shares are up 54.2% year to date as of the close of trading on Wednesday.
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--Written by a member of TheStreet Ratings Staff.