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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Discover Financial Services (XNYS:DFS) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
DFS
Name:
DISCOVER FINANCIAL SERVICES (XNYS:DFS)
Sector:
1.68B
Industry:
Credit Services
CEO:
Mr. Roger Hochschild
Total Employees:
16,700
Our Technological Advancement Rating
Our Rating:
D
Technological advancement compared to industry is -101.92% lower
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF DISCOVER FINANCIAL SERVICES(DFS) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND CREDIT SERVICES INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
99.53
One Month Price Target:
$100.32
Six Month Price Target :
$104.28
Likely Price in One Year's Time:
Ticker:
$109.02
Likely Trading Range Today Under (Normal Volatility)
$99.
Price Upper limit ($) :
$100.25
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$92.06
This week:
$82.84
This month :
$66.14
Other Primary facts
Market Cap:
26.63B
Market Cap Classification:
Large Cap
Number of Shares
IPO Date:
273.17M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
26.75%
-26.84%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$134.16
$118.21
$64.90
$80.85
Medium risk (<10%) entry points
Buy Call
Sell Call
$113.02
Buy Put:
Sell Put:
$109.61
$86.00
$89.45
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
DFS
Sharpe Ratio:
2.30%
Comparison:
DFS, is amongst the top 40% stocks with highest risk-adjusted returns
Sharpe ratio is 23.80% higher than the industry
& ratio is 0.98% higher than the market/S&P 500 average
Average Returns/Yield of
DFS
Daily returns:
0.09%
Weekly returns:
0.47%
Monthly returns:
1.88%
Yearly returns:
19.06%
Comparison of returns:
Average annual returns/yield (last 3 years) is 18.28% above industry average
Classification:
DFS, is amongst the top 40% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.11
Statistical test of Returns:
DFS has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
3.70%
Weekly Volatility:
8.27%
Monthly Volatility:
16.54%
Yearly Volatility:
57.29%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
0.16%
Volatility in last five trading days has been -95.61% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-7.50%
Weekly VaR:
-16.77%
Monthly VaR:
-33.54%
How Much Can the price of
DFS
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-29%
Worst case (decline):
>85%
This translates to price declining to:
$71.08
This translates to price declining to:
$14.93
Severe Crash Probability
Risk of crash in next 6/12 months: High (50-70%)
What is Value at Risk (VaR)?
Risk Fundamentals
DFS is a 136.74% riskier investment compared to the market/S&P 500 & is 102.82% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is 12.06% above industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
DFS
Beta in relation to market/S&P 500--1.42
Expected beta in 1 year's time:
0.882
Expected beta in 3 year's time:
1.247
Unlevered (debt free) Beta:
0.715
Beta in relation to Nasdaq (XNAS):
1.188
Beta in relation to all global stocks::
1.318
Beta Comparison & Analysis
Beta of competitors/peers::
1.042
Beta is 36.26% higher than peers
Average Industry Beta:
1.332
Beta is 6.55% above industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
37.58%
Sustainable growth rate is 11.37% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.097
Alpha is 42.54% above industry average alpha yield
Alpha is 616% higher than market/& is unsustainably high
Analysis of Cost of Capital of
DFS
Equity cost of capital:
0.129
Equity cost of capital is 4.87% above industry mean WACC
Unlevered (without debt) cost of capital:
6.49%
Before-tax cost of debt:
6.27%
After-tax cost of debt:
4.96%
Overall debt rating:
Lower BB medium grade (Fifth highest grade)
Weighted average cost of capital (WACC):
4.96%
WACC is 42.91% above industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$44.64
Revenue growth rate per share of (3Y):
2.02
Annual revenue growth rate is -83.87% below industry average
EPS:
$16.97
Expected Annual growth rate of EPS (3Y):
25.20%
Expected future EPS growth rate is 0.57% higher than the Credit Services industry
Free cash flow (FCF) per share:
$20.52
Balance sheet equity growth per share: 29.10%
Equity growth rate per share is 22.25% higher than the industry
Debt per share
$62.72
EBITDA per share
$30.12
Valuation Analysis Today of
DFS
P/E Ratio:
6.42
P/E Ratio of Competitors/Peers:
12.16
P/E ratio is -47.22% lower than main peers & is -47.12% lower than the industry
Stock price/value with industry average P/E ratio: $205.97
DFS is -51.68% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $39.69
Present value of the expected future dividends only: $22.82
P/S (Price to Sales ratio):
2.23
Price to sales ratio is -57.10% below the industry mean
P/B (Price to book value ratio):
2.02
Price to free cash flow: 4.85
-
Net income growth rate (3Y):
122.67%
Net income growth rate is 659.51% higher than the average industry net income growth rate
Dividend Analysis
Dividend payout rate: 3.14%
Dividend yeild: 2.11%
Previous Dividend: $0.60
Previous adjusted dividend: $0.60
Previous Dividend: $2.10
Expected next dividend best case: $0.64
Expected next dividend worst case: $0.56
Average dividend payment (long-term): $0.47
Average dividend increase/decrease (growth rate) % per period: 3.36%
Expected next dividend payment date: 09/07/2022
Expected next dividend record date: 24/08/2022
Expected next dividend declaration date: 26/07/2022
Previous dividend payment date: 06/09/2022
Previous dividend record date: 26/05/2022
Previous dividend declaration date: 27/04/2022
Dividend History:
2022-05-25--$0.60
2021-11-23--$0.50
2021-05-19--$0.44
2022-02-16--$0.50
2021-08-18--$0.50
2021-02-17--$0.44
Dividend growth rate is -135.12% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
127.54%
Net debt to equity ratio:
55.88%
Debt to assets ratio:
15.95%
Net debt to assets ratio:
6.99%
Debt-to-asset ratio is -79.54% below industry average
Ability to repay debt:
Interest coverage ratio:
7.65
Interest coverage ratio is -22.08% less than industry average
Looking forward:
Debt growth rate:
-4.77%
Annual debt growth is -110% lower than industry average debt growth rate
Debt repayment rate in last quarter: 12.98%
Analysis of Key Statistics
Correlation of price movement with the market:
0.717
Statistical significance of correlation:
DFS has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.561
Stock price is 27.94% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.561
Correlation of price movement with Nasdaq (^IXIC):
0.029
Covariance of price movement with the market:
0.062
Kurtosis
13.615
Returns have severe fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are considerably more likely, compared to assets with normally distributed returns
Skewness of returns:
-0.382
Returns are, approximately, symmetrical
Fundamental Analysis & Dupont Analysis of
DFS
Gross Profit Margin Ratio:
-
Operating Profit Margin Ratio:
0.00%
-
Net Profit Margin Ratio:
-
Effective Tax Rate:
22.79%
Effective tax rate is 5.26% higher than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
37.95%
Return on equity (ROE) is -10.48% lower than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
4.75%
Return on assets (ROA) is -21.67% lower than the industry
Financial Leverage:
1.2x
Current Ratio:
0
-
Cash Conversion Cycle (days):
0
-
The remaining useful life of property plant & equipment is: 15.6 years
Stock based compensation to net income ratio:
-
In-depth Efficiency Analysis
Revenue generated per employee:
730.2K
Each employee generates 1% more revenue than industry average revenue per employee
EBITDA generated per employee:
492.8K
Each employee generates 17% more EBITDA than industry average revenue per employee
Profit generated per employee:
305.3K
Each employee generates 26% more net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
100.8K
Each employee generates 72% more free cash flow than industry average revenue per employee
Assets/Capital per employee
448.4K
Each employee generates 72% more free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
DFS
FIRST REPUBLIC BANK (XNYS:FRC)
STATE STREET CORPORATION (XNYS:STT)
ALL
AMERIPRISE FINANCIAL, INC. (XNYS:AMP)
Itau Unibanco Holding SA (XNYS:ITUB)
Banco Bradesco SA (XNYS:BBD)
MANULIFE FINANCIAL CORP (XNYS:MFC)
ARTHUR J. GALLAGHER & CO. (XNYS:AJG)
Mizuho Financial Group, Inc. (XNYS:MFG)
Current Analyst Ratings
Strong buy�33%
Buy�33%
Hold�33%
Sell�4%
Strong sell�0%
Overall analyst sentiment is: Strong buy
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
12.19B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
-
-
-
1.98B
2.83B
848.00M
-
-
10.74B
1.08B
551.00M
8.23B
-
5.10B
6.60B
1.51B
5.10B
Statement of Cash Flow
Date:
Period:
139.00M
Differed Income Tax :
- 10000.00K
Stock Based Compensation :
-
Change in Working Capital :
92.00M
Accounts Receivables:
-
Other Working Capital:
-
Other Non-Cash Items:
271.00M
Net Cash Provided by Operating Activities:
1.73B
Investments in PP&E:
- 51000.00K
Net Acquisitions:
-
Purchases of Investments:
- 37000.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
9.63B
1.63B
11.26B
928.00M
-
-
-
984.00M
255.00M
-
6.25B
-
-
7.49B
114.90B
107.41B
-
-
-
-
-
-
17.13B
-
17.13B
111.11B
93.98B
6.00M
25.83B
- 213000.0K
- 13249000.00K
March 31, 2022 at 6:00:00 AM
-
13.43B
107.41B
7.88B
17.13B
7.5B
852.00M
- 103000.00K
661.00M
- 2556000.00K
2.00M
- 944000.00K
- 160000.00K
- 426000.00K
- 4084000.00K
-
- 1689000.00K
9.64B
11.33B
1.73B
- 51000.00K
1.68B
Our Proprietary Portfolio Rating
Our Rating:
D
Price Forecast/Expected Price in Next 5 Years of
DFS
2023
2024
2025
2026
2027
$109.57
$182.73
$200.16
$219.25
$240.16