Cash America International (NYSE: CSH) and Discover Financial Services (NYSE:DFS) are both financials companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, analyst recommendations and earnings.
Institutional and Insider Ownership
86.2% of Discover Financial Services shares are held by institutional investors. 1.0% of Discover Financial Services shares are held 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.
This is a summary of recent recommendations and price targets for Cash America International and Discover Financial Services, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Cash America International||0||1||1||0||2.50|
|Discover Financial Services||1||7||16||0||2.63|
Cash America International presently has a consensus price target of $57.00, indicating a potential upside of 35.07%. Discover Financial Services has a consensus price target of $73.89, indicating a potential upside of 24.33%. Given Cash America International’s higher possible upside, research analysts plainly believe Cash America International is more favorable than Discover Financial Services.
Valuation & Earnings
This table compares Cash America International and Discover Financial Services’ gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Cash America International||N/A||N/A||N/A||$1.18||35.76|
|Discover Financial Services||$7.17 billion||3.09||$2.16 billion||$5.79||10.26|
Discover Financial Services has higher revenue and earnings than Cash America International. Discover Financial Services is trading at a lower price-to-earnings ratio than Cash America International, indicating that it is currently the more affordable of the two stocks.
Cash America International pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. Discover Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 2.0%. Cash America International pays out 27.1% of its earnings in the form of a dividend. Discover Financial Services pays out 20.7% 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. Cash America International has increased its dividend for 6 consecutive years and Discover Financial Services has increased its dividend for 2 consecutive years. Discover Financial Services is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Cash America International and Discover Financial Services’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Cash America International||0.87%||0.86%||0.64%|
|Discover Financial Services||20.91%||21.28%||2.46%|
Volatility & Risk
Cash America International has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500. Comparatively, Discover Financial Services has a beta of 1.46, meaning that its stock price is 46% more volatile than the S&P 500.
Discover Financial Services beats Cash America International on 12 of the 14 factors compared between the two stocks.
Cash America International Company Profile
Cash America International, Inc. provides specialty financial services to individuals through its storefront lending and franchised check cashing locations. The Company offers secured non-recourse loans, referred to as pawn loans, as its primary line of business. The Company is also engaged in originating, arranging, guaranteeing or purchasing consumer loans in some of its locations. The Company also offers check cashing and other ancillary products and services, including money orders, wire transfers and auto insurance. The Company’s franchised check cashing business offers check cashing services through its franchised check cashing centers. The Company provides its services in the United States under the names Cash America Pawn, SuperPawn, Cash America Payday Advance, Cashland and Mr. Payroll. The Company is engaged in pawn lending activities, merchandise disposition activities, consumer loan activities and check cashing and other financial services.
Discover Financial Services Company Profile
Discover Financial Services (DFS) is a direct banking and payment services company. The Company is a bank holding company, as well as a financial holding company. The Company operates through two segments: Direct Banking and Payment Services. It provides direct banking products and services, and payment services through its subsidiaries. It offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company’s Direct Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer banking products and services. The Company’s direct banking offers credit cards, student loans, personal loans, home equity loans, and other consumer lending and deposit products. The Payment Services segment includes PULSE, Diners Club and the Company’s Network Partners business.
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