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Why Discover Financial Services Rose 14.5% in April

By Joe Tenebruso - May 10, 2019 at 7:54PM

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The credit card giant showed that sometimes, less risk means more reward.

What happened

Shares of Discover Financial Services ( DFS 2.97% ) climbed nearly 15% last month, according to data provided by S&P Global Market Intelligence, following the company's first-quarter results. 

So what

Discover's adjusted revenue rose 7% year over year, to $2.76 billion. That was slightly above Wall Street's estimates for adjusted revenue of $2.75 billion. Discover's earnings per share, meanwhile, jumped 18%, to $2.15. That, too, bested analysts' expectations, which had been for earnings per share (EPS) of $2.00. 

Discover grew its loan portfolio by 7%, to $88.7 billion. The company also continues to demonstrate an ability to generate strong returns while controlling risk. The credit card giant's first-quarter return on equity and total net charge-off rate checked in at 26% and 3.25%, respectively. 

"Once again, this quarter showed the power of the Discover business model to deliver outstanding shareholder returns," CEO Roger Hochschild said in a press release. "Our solid execution on growth initiatives, effective credit risk management, and operating efficiency drove strong profitability."  

A person turning a dial labeled risk to low next to a gauge labeled return that's turned to max.

Discover Financial Services has done an admirable job of balancing risk and reward. Image source: Getty Images.

Now what 

Discover's stock is now up 35% so far in 2019. But with shares still trading for less than 10 times earnings, my colleague Matthew Cochrane believes this credit card titan remains a compelling buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Discover Financial Services Stock Quote
Discover Financial Services
$111.90 (2.97%) $3.23

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