Capital One (NYSE:COF) is a great company that's viewed as a mediocre company with a slow industry's stock price. The firm recently reported a slightly positive earnings result that was met with some muted optimism, but the share price still seems extremely low to me.

The results
Capital One posted earnings growth of 6% to $1.89 per share in the second quarter. Results included a net of $0.16 of non-operating items in part because of the merger integration of North Fork Bancorp. The company also reiterated its 2007 earnings guidance of $7.00 to $7.40.  

Lately, Capital One has had to deal with a lot of headwinds. First of all, the credit card industry has become intensely competitive. In a recent investor presentation, Capital One noted that its percentage of mail volume with 0% balance transfer teasers was at the low end of the industry, at only about 20% (only American Express (NYSE:AXP) was lower). At the top end were Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Citibank (NYSE:C), and Discover (NYSE:DFS), who, together with Capital One (which is No. 4), make up the five largest credit card issuers in the U.S.

As a result of this heavy competition, Capital One's credit card growth has slowed down, and the company ended the fourth quarter with $50 billion in managed loans for the U.S. card business, which was only 3% more than last year.

Some other headwinds besides very competitive credit card rates are the tough banking environment, the subprime mortgage meltdown, the normalizing bankruptcy rates, and bankruptcy problems in the United Kingdom.

Despite the headwinds, I feel that Capital One's low 10 times forward earnings multiple is too low. It's almost as if the stock market values Capital One as if it were a mediocre bank, which is absurd. Capital One's banking division is a relatively superior franchise, and most of its income is from the U.S. card division. I think that once Capital One turns the corner and gets back on a growth track, the market will reward it with a much richer multiple.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool has a disclosure policy you can take to the bank.