Following Donald Trump’s surprise presidential victory, financial stocks have gained solid momentum, reflecting investors’ expectations of easing regulations as well as increased public spending which may lead to higher inflation. Further, with greater chances of a Fed rate hike next month, undoubtedly the finance sector seems be an attractive investment option.
Among the several potential gainers, adding Discover Financial Services DFS to your portfolio should not disappoint. Apart from being one of the largest card issuers in the U.S., the company provides direct banking products and services as well as payment services. With assets over $90.5 billion, this Riverwoods, IL-based company continues to reflect strength in several areas.
In fact shares of Discover Financial climbed 18.1% over the past 3 months.
DISCOVER FIN SV Price
Why Is the Stock an Attractive Pick?
Growing Loans: In recent years, Discover Financial has managed to register solid growth in its total loans, along with improving credit quality trends. Notably, as of Sep 30, 2016, the company’s total loans, which consist of credit card loans, personal loans and private student loans, increased 5% year over year to $73.6 billion. It is well positioned for continued growth in the upcoming quarters given its several initiatives, including ongoing investments in the card business. Management anticipated total loan growth in the range of 4–6% for the year.
Earnings per Share Growth: Discover Financial has witnessed approximately 6% rise in earnings per share in the last five years. The U.S. consumer finance industry remains healthy amid a declining unemployment and improving housing sector. Discover Financial, with strong brand recognition, product innovation and customer acquisition strategies, will continue to benefit from the broader favorable trends. Notably, this earnings momentum will likely continue in the near term, as reflected by the company’s projected EPS growth (F1/F0) of 12.4%.
Steady Capital Deployment Activities: Driven by capital strength, Discover Financial’s 2016 capital plan won Federal Reserve’s approval in June, following which the company announced 7% hike in the quarterly dividend to 30 cents per share and approved a new $2.5 billion share repurchase program in July. During third-quarter 2016, the company repurchased around 10 million shares for $581 million.
Upward Estimates Revisions: Over the past 30 days, the Zacks Consensus Estimate for Discover Financial was up 1.2% to $5.77 per share for 2016 and 1% to $6.13 per share for 2017. The positive earnings estimate revisions indicate analysts’ confidence and substantiate the Zacks Rank #2 (Buy) for the stock. Notably, the attractiveness of this stock as an investment option at this stage is further underscored by its Momentum Style Score ‘B.’
Other Stocks to Consider
Compass Diversified Holdings LLC CODI: The Zacks Consensus Estimate for 2016 moved up 1.4% to $1.43 per share for 2016 and 1.7% to $1.78 for 2017, over the last 30 days. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Vantiv, Inc. VNTV: Over the last 30 days, the Zacks Consensus Estimate for the current year inched up 1.2% to $2.57 per share and edged up 1% to $2.93 for 2017. The company carries a Zacks Rank #2.
Regional Management Corp. RM: The Zacks Consensus Estimate for 2016 grew 1% for both 2016 and 2017, to $2.03 per share and $2.68 per share, respectively over the last 30 days. The company carries a Zacks Rank #2.
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COMPASS DIVERSF (CODI): Free Stock Analysis Report
DISCOVER FIN SV (DFS): Free Stock Analysis Report
VANTIV INC-A (VNTV): Free Stock Analysis Report
REGIONAL MANAGE (RM): Free Stock Analysis Report
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Zacks Investment Research DFS Research -- Mutual Funds Top 10 Holdings include "DFS"
CODI Research -- Mutual Funds Top 10 Holdings include "CODI"
VNTV Research -- Mutual Funds Top 10 Holdings include "VNTV"
RM Research -- Mutual Funds Top 10 Holdings include "RM"