- January 8, 2023
- Posted by: Bastion team
- Category: World News
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Discover Financial Services (NYSE:DFS) share price is up 28% in the last five years, that’s less than the market return. The last year has been disappointing, with the stock price down 18% in that time.
On the back of a solid 7-day performance, let’s check what role the company’s fundamentals have played in driving long term shareholder returns.
View our latest analysis for Discover Financial Services
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Discover Financial Services managed to grow its earnings per share at 22% a year. The EPS growth is more impressive than the yearly share price gain of 5% over the same period. So it seems the market isn’t so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 6.49.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).