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Discover Financial Eyes Growth Despite Increase in Costs
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On Mar 28, 2017, we issued an updated research report on Discover Financial Services (DFS - Free Report) .
In the last one year, the stock has gained 35.6%, outperforming the Zacks categorized Consumer Loans industry that registered an increase of 21.7%. The stock price appreciation may primarily be attributed to Discover Financial’s solid brand recognition, strong credit card business, continuous product innovation, and customer acquisition strategies.
With assets of over $90.5 billion, this company continues to remain strong in several areas. Discover Financial, along with other financial service providers like Visa Inc. (V - Free Report) , American Express Company (AXP - Free Report) and MasterCard Inc. (MA - Free Report) to name a few, is poised to gain from Donald Trump’s victory in the Presidential election. Investors remain optimistic about easing of regulations that are likely to increase consumer spending with cards and loans under the Trump administration.
In recent years, Discover Financial has displayed solid growth in its total loans, along with improvement in credit quality trends. Total loan – comprising credit card loans, personal loans and private student loans – grew at a five-year CAGR of 5.4% (2012–2016). Management anticipates total loan portfolio to grow 5.5–7.5% in 2017.
Furthermore, the company’s capital strength enables it to take up several capital deployment initiatives to enhance shareholders’ value. Discover Financial received a non-objection from the Fed for its proposed capital actions. During fourth-quarter 2016, the company repurchased about 7.7 million shares of common stock for $477 million.
However, the company’s bottom-line growth may be limited by increasing costs.. Discover Financial incurs substantial expenses owing to marketing and business development. In fact, the company’s expenses increased at a CAGR of 4% over the past six years (2012–2016), hurting its profitability. These apart, anti-money laundering program enhancements, infrastructure investments and high legal, regulatory and compliance costs have contributed to the escalating expenses.
In addition, the company’s Payments Service segment has been continuously underperforming. The segment witnessed decline at a four-year CAGR of 5% in 2016, mainly due to the consistent increase in expenses amid a challenging debit environment.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
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Discover Financial Eyes Growth Despite Increase in Costs
On Mar 28, 2017, we issued an updated research report on Discover Financial Services (DFS - Free Report) .
In the last one year, the stock has gained 35.6%, outperforming the Zacks categorized Consumer Loans industry that registered an increase of 21.7%. The stock price appreciation may primarily be attributed to Discover Financial’s solid brand recognition, strong credit card business, continuous product innovation, and customer acquisition strategies.
With assets of over $90.5 billion, this company continues to remain strong in several areas. Discover Financial, along with other financial service providers like Visa Inc. (V - Free Report) , American Express Company (AXP - Free Report) and MasterCard Inc. (MA - Free Report) to name a few, is poised to gain from Donald Trump’s victory in the Presidential election. Investors remain optimistic about easing of regulations that are likely to increase consumer spending with cards and loans under the Trump administration.
In recent years, Discover Financial has displayed solid growth in its total loans, along with improvement in credit quality trends. Total loan – comprising credit card loans, personal loans and private student loans – grew at a five-year CAGR of 5.4% (2012–2016). Management anticipates total loan portfolio to grow 5.5–7.5% in 2017.
Furthermore, the company’s capital strength enables it to take up several capital deployment initiatives to enhance shareholders’ value. Discover Financial received a non-objection from the Fed for its proposed capital actions. During fourth-quarter 2016, the company repurchased about 7.7 million shares of common stock for $477 million.
However, the company’s bottom-line growth may be limited by increasing costs.. Discover Financial incurs substantial expenses owing to marketing and business development. In fact, the company’s expenses increased at a CAGR of 4% over the past six years (2012–2016), hurting its profitability. These apart, anti-money laundering program enhancements, infrastructure investments and high legal, regulatory and compliance costs have contributed to the escalating expenses.
In addition, the company’s Payments Service segment has been continuously underperforming. The segment witnessed decline at a four-year CAGR of 5% in 2016, mainly due to the consistent increase in expenses amid a challenging debit environment.
Discover Financial presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>