Yahoo Finance Do Discover Financial Services's (NYSE:DFS) Earnings Warrant Your Attention?
Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.
So if you're like me, you might be more interested in profitable, growing companies, like Discover Financial Services (NYSE:DFS). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
See our latest analysis for Discover Financial Services
How Quickly Is Discover Financial Services Increasing Earnings Per Share?
As one of my mentors once told me, share price follows earnings per share (EPS). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Discover Financial Services has grown EPS by 35% per year, compound, in the last three years. If the company can sustain that sort of growth, we'd expect shareholders to come away winners.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. I note that Discover Financial Services's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Discover Financial Services maintained stable EBIT margins over the last year, all while growing revenue 84% to US$11b. That's progress.
The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for Discover Financial Services?
Are Discover Financial Services Insiders Aligned With All Shareholders?
Since Discover Financial Services has a market capitalization of US$37b, we wouldn't expect insiders to hold a large percentage of shares. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$174m. This suggests to me that leadership will be very mindful of shareholders' interests when making decisions!
Does Discover Financial Services Deserve A Spot On Your Watchlist?
For growth investors like me, Discover Financial Services's raw rate of earnings growth is a beacon in the night. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 3 warning signs for Discover Financial Services (1 can't be ignored!) that you should be aware of.
You can invest in any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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