Discover Financial Services (DFS, Financial) has experienced a notable uptick in its stock performance, with a market capitalization now standing at $30.53 billion. The current price of $122.11 reflects a 1.20% gain over the past week and an impressive 32.29% gain over the past three months. According to the GF Value, which is currently set at $156.25, DFS is considered modestly undervalued. This is a positive shift from its previous status three months ago when it was significantly undervalued at a GF Value of $152.39.
Introduction to Discover Financial Services
Discover Financial Services operates within the credit services industry, focusing on direct banking and payment services. It issues credit and debit cards and offers a range of consumer banking products, including deposit accounts, student loans, and personal loans. The company also manages the Discover, Pulse, and Diners Club networks, with Discover being the fourth-largest payment network in the U.S. by purchase volume and Pulse being one of the country's largest ATM networks. 
Assessing Profitability
Discover Financial Services boasts a Profitability Rank of 7 out of 10, indicating a strong ability to generate profits relative to its industry peers. The company's return on equity (ROE) is an impressive 20.52%, outperforming 87.86% of its competitors. Additionally, its return on assets (ROA) stands at 2.11%, surpassing 52.48% of industry peers. Notably, DFS has maintained profitability for the past 10 years, a feat better than 99.81% of its competitors. 
Growth Trajectory of Discover Financial Services
Discover Financial Services has achieved a perfect Growth Rank of 10 out of 10, reflecting its robust revenue and profitability expansion. The company's 3-year revenue growth rate per share stands at 10.20%, which is better than 63.19% of its industry peers. Over a 5-year period, this growth rate increases to 11.40%, surpassing 67.98% of competitors. Looking ahead, the estimated total revenue growth rate for the next 3 to 5 years is 8.04%, which is more favorable than 49.18% of industry peers. The 3-year EPS without NRI growth rate is 19.50%, and the 5-year rate is 21.80%, both of which are higher than the majority of industry peers. However, the estimated EPS growth rate for the next 3 to 5 years is a slight decline at -0.25%, still better than 9.09% of industry peers. 
Top Shareholders in Discover Financial Services
Glenn Greenberg (Trades, Portfolio) is the leading shareholder with 2,633,167 shares, representing a 1.05% share percentage. Following closely is PRIMECAP Management (Trades, Portfolio), holding 1,794,919 shares, which equates to a 0.72% share percentage. HOTCHKIS & WILEY rounds out the top three with 1,263,960 shares, accounting for a 0.51% share percentage. These significant investments by top holders indicate a strong confidence in the company's financial health and growth prospects.
Competitive Landscape
When compared to its competitors, Discover Financial Services holds a strong market position. Synchrony Financial (SYF, Financial) has a market cap of $16.48 billion, Ally Financial Inc (ALLY, Financial) is valued at $11.15 billion, and SoFi Technologies Inc (SOFI, Financial) stands at $8.07 billion. DFS's larger market cap suggests a more dominant presence in the credit services industry and a potentially more stable investment opportunity.
Conclusion
In summary, Discover Financial Services has demonstrated a robust stock performance, with its valuation transitioning from significantly to modestly undervalued according to the GF Value. The company's profitability and growth metrics are commendable, with a strong track record and promising future estimates. The confidence of top shareholders and the company's competitive edge in the market further solidify its position as a potentially lucrative investment. Investors may find DFS's current trajectory and market standing to be an attractive opportunity within the credit services sector.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
