Provident Financial (OTCMKTS: FPLPY) and Discover Financial Services (NYSE:DFS) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, valuation, profitability, dividends, earnings, institutional ownership and risk.
Risk and Volatility
Provident Financial has a beta of -2.56, suggesting that its stock price is 356% less volatile than the S&P 500. Comparatively, Discover Financial Services has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500.
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|
|Discover Financial Services||18.43%||22.79%||2.43%|
Institutional & 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 insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Provident Financial pays an annual dividend of $1.68 per share and has a dividend yield of 20.0%. Discover Financial Services pays an annual dividend of $1.40 per share and has a dividend yield of 1.8%. Provident Financial pays out 207.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Discover Financial Services pays out 23.4% of its earnings in the form of a dividend. Discover Financial Services has increased its dividend for 7 consecutive years.
This is a breakdown of current ratings for Provident Financial and Discover Financial Services, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Discover Financial Services||0||8||14||1||2.70|
Discover Financial Services has a consensus target price of $85.40, indicating a potential upside of 10.29%. Given Discover Financial Services’ higher probable upside, analysts plainly believe Discover Financial Services is more favorable than Provident Financial.
Valuation & Earnings
This table compares Provident Financial and Discover Financial Services’ revenue, earnings per share (EPS) 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||2.34||$2.10 billion||$5.98||12.95|
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.
Discover Financial Services beats Provident Financial on 15 of the 16 factors compared between the two stocks.
Provident Financial Company Profile
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.
Discover Financial Services Company Profile
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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