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Profitable plastic

Investment from 8,300 USD

Expires: 18/04/2019

Expected
yearly returns
103%

This company specialises in issuing credit and debit cards (their own Discover Card), electronic payments (they run the Discover Network, PULSE, and Diners Club International payment systems), consumer loans, savings accounts, and certificates of deposit. The company was founded in 1986 and has since become one of the largest credit card issuers in the US. Among the company biggest shareholders are: BlackRock (8.24%), J.P. Morgan Chase (3.52%), The Bank of New York Mellon (1.22%), Morgan Stanley (0.75%), UBS (0.59%).

Growth factors:

  • Continued implementation of a strategy focusing on the educational and mortgage loans sectors, which may receive an additional impetus for growth depending on the success of Donald Trump programs.
  • An increase in revenue through cooperation with the world-renowned PayPal payment system. Discover card holders will be able pay for items online through PayPal and the CashBack Bonus function will be added.
  • Continued growth of the company loan portfolio, which in 2017 is expected to grow by about 5.5%-7.5%. In the 4th quarter of 2016, the company loan portfolio grew by 7% YoY, in which debt from credit cards grew by 6% YoY, student loans by 2% YoY and consumer loans by 18% YoY.
  • Maintaining a good revenue growth rate: net revenue growth in the second, third and fourth quarters of 2016 came to 1.9% YoY, 5.2% YoY and 6.9% YoY respectively.
  • High profit margins: the ratio of net profit to net revenue in the second, third and fourth quarters averaged 24.8% (minimum of 23.3% for this period). The return on equity in the second, third and fourth quarters was 20.85%, 21.18% and 21.24% respectively.
  • Low risks to financial sustainability: the ratio of total debt to total assets is just 27.56%.
  • The company is undervalued compared to its competitors: its P/E discount rate is 6%.

Investment period ends:
18/04/2019

Expected yield is calculated according to 95% capital protection and the price of the base asset at expiry, equal to 101 USD.

Technical Analysis:

Discover Financial Services share price is readying itself to exit the cloud on the Ichimoku indicator upwards on the daily chart. The dynamics of the share price continue to move in an upwards trend. Significant technical levels: 73.16; 70.49; 68.61; 66.59; 64.29; 60.95; 57.61; 54.76.

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