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Discover’s Discounted Valuations: A Buying Opportunity?

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Buying opportunity

Discover Financial Services’ (DFS) banking services have been ranked second in terms of customer satisfaction, according to a survey conducted by J.D. Power in August 2017. According to the study, a credit card company that offers its customers the highest cash back rewards is able to accumulate a larger share in the minds of credit card customers.

The mobile app that Discover Financial offers its customers seems well-liked by most of its credit card holders. It’s been ranked number one in terms of customer satisfaction compared to other US credit card companies.

Discover Financial currently has a one-year forward PE (price-to-earnings) ratio of 11.20x compared to its competitors’ average of 13.47x, which implies its discounted valuations. Discover’s peers have the following one-year forward PE ratios:

  • SunTrust Banks (STI): 14.66x
  • KeyCorp (KEY): 13.48x
  • Synchrony Financial (SYF): 12.29x

Discover Financial Services is expected to see an increase in its valuations in the second half of 2017 if the company sees a rise in spending volumes in the upcoming quarters. According to top management, the company currently has ample capital to fuel further investments to drive growth.

Price-to-earnings ratio

Discover Financial Services (DFS) has a PE ratio of 11.35x. Other consumer financial players (XLF) have the following PE ratios:

  • SunTrust Banks (STI): 15.87x
  • KeyCorp (KEY): 19.12x
  • Synchrony Financial (SYF): 11.97x

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