Discover Financial Services Fundamental Analysis
Discover Financial Services Fundamental Analysis
Discover Financial Services (DFS) shows strong financial fundamentals with a PE ratio of 11.30, profit margin of 22.65%, and ROE of 28.20%. The company generates $20.1B in annual revenue with N/A year-over-year growth of N/A.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 77.1/100 based on profitability, valuation, growth, and balance sheet metrics. The B grade reflects solid fundamentals with room for improvement in valuation or growth.
Fundamental Health Score
We analyze DFS's fundamental strength across five key dimensions:
Efficiency Score
WeakDFS struggles to generate sufficient returns from assets.
Valuation Score
ExcellentDFS trades at attractive valuation levels.
Growth Score
ModerateDFS shows steady but slowing expansion.
Financial Health Score
ModerateDFS shows balanced financial health with some risks.
Profitability Score
ExcellentDFS achieves industry-leading margins.
Key Financial Metrics
Is DFS Expensive or Cheap?
P/E Ratio
DFS trades at 11.30 times earnings. This suggests potential undervaluation.
PEG Ratio
When adjusting for growth, DFS's PEG of 0.16 indicates potential undervaluation.
Price to Book
The market values Discover Financial Services at 2.80 times its book value. This may indicate undervaluation.
EV/EBITDA
Enterprise value stands at 6.68 times EBITDA. This is generally considered low.
How Well Does DFS Make Money?
Net Profit Margin
For every $100 in sales, Discover Financial Services keeps $22.65 as profit after all expenses.
Operating Margin
Core operations generate 88.29 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $28.20 in profit for every $100 of shareholder equity.
ROA
Discover Financial Services generates $3.07 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Discover Financial Services generates strong operating cash flow of $8.45B, reflecting robust business health.
Free Cash Flow
Discover Financial Services generates strong free cash flow of $8.18B, providing ample flexibility for dividends, buybacks, or growth.
FCF Per Share
Each share generates $32.50 in free cash annually.
FCF Yield
DFS converts 16.20% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
11.30
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
0.16
vs 25 benchmark
P/B Ratio
Price to book value ratio
2.80
vs 25 benchmark
P/S Ratio
Price to sales ratio
2.51
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.91
vs 25 benchmark
Current Ratio
Current assets to current liabilities
0.15
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.28
vs 25 benchmark
ROA
Return on assets percentage
0.03
vs 25 benchmark
ROCE
Return on capital employed
0.44
vs 25 benchmark
How DFS Stacks Against Its Sector Peers
| Metric | DFS Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 11.30 | 21.17 | Better (Cheaper) |
| ROE | 28.20% | 648.00% | Weak |
| Net Margin | 22.65% | -766.00% (disorted) | Strong |
| Debt/Equity | 0.91 | 0.90 | Neutral |
| Current Ratio | 0.15 | 891.36 | Weak Liquidity |
| ROA | 3.07% | 14251.00% | Weak |
DFS outperforms its industry in 2 out of 6 key metrics, particularly excelling in Net Margin, but lagging in ROE.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Discover Financial Services's 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
N/A
Industry Style: Value, Dividend, Cyclical
EPS CAGR
N/A
Industry Style: Value, Dividend, Cyclical
FCF CAGR
N/A
Industry Style: Value, Dividend, Cyclical