Visa vs. Discover Financial: Which Credit Card Stock is a Better Buy?

NYSE: V | Visa Inc. CI A News, Ratings, and Charts

V – Visa (V) and Discover FInancial (DFS) are two of the top credit card companies. One key difference is that Visa is focused on processing transactions, while Discover assumes credit risk. Patrick Ryan explains which stock is the better buy.

Currently, conditions are optimal for credit card companies. Consumer spending is at record highs, while household balance sheets are in good shape. Thus, defaults are likely to be low especially as the economy will remain strong well into 2022.

 

Of course, credit card spending continues to take a larger share of the pie which has been a multidecade trend. For investors, they can choose between credit card companies that take on risk or companies that simply process transactions.
 
Visa (V) and Discover Financial (DFS) are two of the most intriguing credit card plays to consider as the economy reopens.
 
Visa (V)

V operates a global electronic payment network. This business has been publicly traded since the spring of 2008. V’s VisaNet serves merchant clients and financial institutions. V’s tech experts are also working to advance the company’s progress in the crypto space.

V is accepted as a form of payment in more than 200 countries. The company’s 3.5 billion cards and the aggregate volume of $11.8 trillion are considerably larger than the card figures and aggregate volume of Mastercard (MA) and American Express. In contrast, MA has 2.2 billion cards and $6.5 trillion of total volume. American Express has 114 million cards and an aggregate volume of $1.2 trillion.

V has a C POWR Rating grade indicating the sock is a Hold. V has Bs in the Quality, Momentum, Sentiment, and Stability components of the POWR Ratings. You can find out more about the stocks that make up this segment by clicking here.

Of the 51 publicly traded companies in the Consumer Financial Services sector, V is ranked in the top 20, slotting in at #19 overall. You can learn more about the Consumer Financial Services space by clicking here.

V has a forward P/E ratio of 40.78, a somewhat concerning figure. However, V has a reasonable beta of 1 on the nose, meaning it is not excessively volatile.

The analysts are bullish on V, establishing an average target price of $265.48 for the stock. If V hits this target price, it will have popped by nearly 17%. The highest target price for V is $297 while the lowest target price for the stock is $234. Across the past 154 days, the stock’s average target price has increased by nearly $38. A total of 41 analysts have issued V recommendations. Exactly 13 of these analysts consider the stock to be a Strong Buy, 23 consider it a Buy, and five consider it a Hold.

Discover Financial (DFS)

DFS is a banking and payment processing business. DFS offers credit cards, student loans, personal loans, deposit products, and more. In total, DFS products are available in more than 180 countries.

Though there is clearly risk in DFS’s portfolio of debts as it primarily consists of credit cards, unemployment is gradually decreasing and federal stimulus dollars have made it surprisingly easy for the destitute to make their credit card payments during the recession.

DFS has a B POWR Rating grade indicating the stock is a Buy. DFS has Bs in the Sentiment, Momentum, and Growth components of the POWR Ratings. Click here to learn more about how DFS fares in the remainder of the POWR Ratings components such as Quality, Value, and Stability.

Of the 51 stocks in the Consumer Financial Services space, DFS is ranked 7th overall. Investors can learn more about this sector by clicking here.

DFS has a forward P/E ratio of 8.74, meaning it is undervalued at its current trading price of $120.88. Furthermore, the stock is within a dollar of its 52-week high of $121.44. You rarely find a stock with a forward P/E ratio under 10 that is nearing its 52-week high. DFS has a beta of 1.84, meaning it will be only slightly volatile if the market as a whole significantly fluctuates in the months ahead.

Of the 21 analysts who have issued DFS recommendations, five consider it a Strong Buy, seven consider it a Buy, and nine consider it a Hold. No analysts view DFS as a Sell or Strong Sell.


V shares were trading at $229.38 per share on Friday morning, up $1.27 (+0.56%). Year-to-date, V has gained 5.18%, versus a 13.22% rise in the benchmark S&P 500 index during the same period.


About the Author: Patrick Ryan


Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
VGet RatingGet RatingGet Rating
DFSGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

2nd Half of 2021 Stock Market Outlook

The stock market (SPY) has continued on a bullish path to start 2021. Yet it is not quite the same glorious bull run we enjoyed from the lows of last year. This market has become more volatile and with less upside potential. However, there is still plenty of money to be made if you look in the right places. That is the very nature of the new presentation I put together. So read on for more info…

:  |  News, Ratings, and Charts

Better Meme Stock: Wendy's or Palantir Technologies?

2021 has been the year of the meme stock. Meme stocks have risen higher and faster than many of the traditional big name high flyers this year. These stocks are being pushed higher by traders on social media. Wendy's Company (WEN) and Palantir Technologies (PLTR) are two stocks that have recently generated a lot of attention, but which is a better buy? Read more to find out.

:  |  News, Ratings, and Charts

Is the Stock Market “Melting Up”?

The last few weeks the S&P 500 (SPY) has been beset with wild sector rotation. That is still at play. However, another trend may also be emerging that deserves some conversation. That is the notion of a market “melt up”. What is that? And what does it mean for our trading strategy? I will answer that and more in this week’s commentary. Read on below to find out more…

:  |  News, Ratings, and Charts

4 ETFs to Buy if Inflation is Transitory

Recently, we've seen the biggest inflation reading since 2008. However, the current consensus is that inflation may be peaking. If this is the case, then the Invesco Dynamic Leisure and Entertainment ETF (PEJ), US Global Jets ETF (JETS), Invesco QQQ Trust (QQQ), and the SPDR S&P Dividend ETF (SDY) are 4 ETFs worth buying. 

:  |  News, Ratings, and Charts

Is the Stock Market “Melting Up”?

The last few weeks the S&P 500 (SPY) has been beset with wild sector rotation. That is still at play. However, another trend may also be emerging that deserves some conversation. That is the notion of a market “melt up”. What is that? And what does it mean for our trading strategy? I will answer that and more in this week’s commentary. Read on below to find out more…

Read More Stories

More Visa Inc. CI A (V) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All V News