Financial Analysis: Discover Financial Services (NYSE:DFS) vs. Atlanticus (NASDAQ:ATLCP)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Discover Financial Services	14.30%	22.24%	2.08%
Atlanticus	N/A	N/A	N/A

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Discover Financial Services and Atlanticus, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Discover Financial Services	0	11	7	0	2.39
Atlanticus	0	0	0	0	N/A

Discover Financial Services presently has a consensus price target of $125.22, suggesting a potential upside of 4.75%. Given Discover Financial Services’ higher probable upside, research analysts plainly believe Discover Financial Services is more favorable than Atlanticus.

Valuation & Earnings

This table compares Discover Financial Services and Atlanticus’ top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Discover Financial Services	$20.61 billion	1.45	$2.94 billion	$11.25	10.63
Atlanticus	$256.34 million	N/A	N/A	N/A	N/A

Discover Financial Services has higher revenue and earnings than Atlanticus.

Insider and Institutional Ownership

86.9% of Discover Financial Services shares are held by institutional investors. 0.5% of Discover Financial Services shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Discover Financial Services pays an annual dividend of $2.80 per share and has a dividend yield of 2.3%. Atlanticus pays an annual dividend of $1.91 per share and has a dividend yield of 8.4%. Discover Financial Services pays out 24.9% of its earnings in the form of a dividend. Discover Financial Services has increased its dividend for 13 consecutive years.

Summary

Discover Financial Services beats Atlanticus on 9 of the 11 factors compared between the two stocks.

About Discover Financial Services

Discover Financial Services, through its subsidiaries, provides digital banking products and services, and payment services in the United States. It operates in two segments, Digital Banking and Payment Services. The Digital Banking segment offers Discover-branded credit cards to individuals; private student loans, personal loans, home loans, and other consumer lending; and direct-to-consumer deposit products comprising savings accounts, certificates of deposit, money market accounts, IRA certificates of deposit, IRA savings accounts and checking accounts, and sweep accounts. The Payment Services segment operates the PULSE to access automated teller machines, debit, and electronic funds transfer network; and Diners Club International, a payments network that issues Diners Club branded charge cards and/or provides card acceptance services, as well as offers payment transaction processing and settlement services. The company was incorporated in 1960 and is based in Riverwoods, Illinois.

About Atlanticus

Atlanticus Holdings Corporation, a financial technology company, provides credit and related financial services and products to customers the United States. It operates in two segments, Credit as a Service, and Auto Finance. The Credit as a Service segment originates a range of consumer loan products, such as private label and general purpose credit cards originated by lenders through various channels, including retail and healthcare, direct mail solicitation, digital marketing, and partnerships with third parties; and offers credit to their customers for the purchase of various goods and services, including consumer electronics, furniture, elective medical procedures, healthcare, and home-improvements by partnering with retailers, healthcare providers, and other service providers. This segment also offers loan servicing, such as risk management and customer service outsourcing for third parties; and engages in testing and investment activities in consumer finance technology platforms. The Auto Finance segment purchases and/or services loans secured by automobiles from or for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, and used car business. This segment also provides floor plan financing and installment lending products. It also invests in and services portfolios of credit card receivables. The company was founded in 1996 and is headquartered in Atlanta, Georgia.