Contrasting Provident Financial (FPLPY) and Discover Financial Services (DFS)

Provident Financial (OTCMKTS: FPLPY) and Discover Financial Services (NYSE:DFS) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their valuation, dividends, profitability, earnings, risk, analyst recommendations and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Provident Financial and Discover Financial Services, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Provident Financial 0 0 0 0 N/A
Discover Financial Services 0 8 14 1 2.70

Discover Financial Services has a consensus price target of $85.40, suggesting a potential upside of 10.57%. Given Discover Financial Services’ higher probable upside, analysts plainly believe Discover Financial Services is more favorable than Provident Financial.

Earnings and Valuation

This table compares Provident Financial and Discover Financial Services’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Provident Financial $1.54 billion 0.81 -$173.21 million $0.81 10.38
Discover Financial Services $11.55 billion 2.33 $2.10 billion $5.98 12.91

Discover Financial Services has higher revenue and earnings than Provident Financial. Provident Financial is trading at a lower price-to-earnings ratio than Discover Financial Services, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

0.1% of Provident Financial shares are owned by institutional investors. Comparatively, 87.6% of Discover Financial Services shares are owned by institutional investors. 0.8% of Discover Financial Services shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Provident Financial has a beta of -2.56, indicating that its stock price is 356% less volatile than the S&P 500. Comparatively, Discover Financial Services has a beta of 1.47, indicating that its stock price is 47% more volatile than the S&P 500.

Profitability

This table compares Provident Financial and Discover Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Provident Financial N/A N/A N/A
Discover Financial Services 18.43% 22.79% 2.43%

Dividends

Provident Financial pays an annual dividend of $0.54 per share and has a dividend yield of 6.4%. Discover Financial Services pays an annual dividend of $1.40 per share and has a dividend yield of 1.8%. Provident Financial pays out 66.7% of its earnings in the form of a dividend. Discover Financial Services pays out 23.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Discover Financial Services has increased its dividend for 7 consecutive years.

Summary

Discover Financial Services beats Provident Financial on 16 of the 17 factors compared between the two stocks.

About Provident Financial

Provident Financial plc provides personal credit products to the non-standard lending market in the United Kingdom and the Republic of Ireland. The company offers credit cards; consumer credit, including unsecured and online instalment loans; and finance for cars and light commercial vehicles. It serves 2.5 million customers through its network of branches, call centers, and Websites. The company was founded in 1880 and is headquartered in Bradford, the United Kingdom.

About Discover Financial Services

Discover Financial Services, through its subsidiaries, operates as a direct banking and payment services company in the United States. The Direct Banking segment offers Discover-branded credit cards to individuals; and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending, as well as deposit products, such as certificates of deposit, money market accounts, savings accounts, checking accounts, and individual retirement arrangement certificates of deposit. The Payment Services segment operates the Discover Network, which processes transactions for Discover-branded credit cards, and provides payment transaction processing and settlement services; and PULSE network, an electronic funds transfer network that provides financial institutions issuing debit cards on the PULSE network with access to automated teller machines and point-of-sale terminals. This segment also operates Diners Club International, a payments network that issues Diners Club branded charge cards and provides card acceptance services. The company was incorporated in 1960 and is based in Riverwoods, Illinois.

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