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Discover Financial Services – Credit Card Issuing
Discover Financial Servicesis a digital banking and payment services company with one of the most trusted brands in U.S. financial services. Since its inception in 1986, the company has become one of the largest card issuers in the United States. The company issues the Discover card, America's cash rewards pioneer, and offers private student loans, personal loans, home loans, checking and savings accounts and certificates of deposit through its banking business. It operates the Discover Global Network comprised of Discover Network, with millions of merchant and cash access locations; PULSE, one of the nation's leading ATM/debit networks; and Diners Club International, a global payments network with acceptance around the world.
Analysis Results
Intrinsic Value $707.20
Latest Price $102.36
Relative Value 86% undervalued
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Cash Flow (Billions)
Analysis Parameters
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Analysis Details
Growth Rate Projection

An exponential growth model was fit to the past cash flow data, giving more weight to more recent years. This model determined a growth rate estimate of 9.0%.

Weighted Average Cost of Capital (WACC)

The calculated WACC is 5.8%. This value is used as the default discount rate.

Value of Future Flows

Assuming a growth rate of 9.0%, the cash flows for the next 5 years are projected.

The present value of each year's flow is adjusted to present value using the discount rate.

Year Future flow (billion) Present value (billion)
2023 5.66 5.35
2024 6.17 5.51
2025 6.73 5.67
2026 7.34 5.85
2027 8.0 6.02
Terminal Value

Assuming a growth rate after the projection years of 2.0%, the terminal value of the company would be 213 billion. This corresponds to a present value of 151 billion.

Intrinsic Value Per Share

The total present value of the projected cash flows is 28.4 billion. Adding in the terminal value gives a total present value of 180 billion.

There are presently 254.0 million outstanding shares, so the intrinsic value per share is 707.2.

Financial Statements

The following data was to determine the past cash flows.

Current Assets 125,851,000,000
Current Cash 0
Current Liabilities 117,038,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 8,813,000,000
Change in NCWC 549,000,000
EBIT 5,742,000,000
Tax Provision 1,350,000,000
Depreciation and Amortization 561,000,000
Capital Expenditure -236,000,000
Unlevered Free Cash Flow 5,266,000,000
Current Assets 105,098,000,000
Current Cash 0
Current Liabilities 96,834,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 8,264,000,000
Change in NCWC 2,343,000,000
EBIT 7,159,000,000
Tax Provision 1,615,000,000
Depreciation and Amortization 531,000,000
Capital Expenditure -194,000,000
Unlevered Free Cash Flow 8,202,280,719
Current Assets 107,926,000,000
Current Cash 0
Current Liabilities 102,005,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 5,921,000,000
Change in NCWC -2,012,000,000
EBIT 1,494,000,000
Tax Provision 294,000,000
Depreciation and Amortization 485,000,000
Capital Expenditure -261,000,000
Unlevered Free Cash Flow -600,087,804
Current Assets 110,070,000,000
Current Cash 0
Current Liabilities 102,137,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,933,000,000
Change in NCWC 370,000,000
EBIT 3,835,000,000
Tax Provision 878,000,000
Depreciation and Amortization 436,000,000
Capital Expenditure -284,000,000
Unlevered Free Cash Flow 3,479,000,000
Current Assets 105,986,000,000
Current Cash 0
Current Liabilities 98,423,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,563,000,000
Change in NCWC 176,000,000
EBIT 3,597,000,000
Tax Provision 855,000,000
Depreciation and Amortization 435,000,000
Capital Expenditure -254,000,000
Unlevered Free Cash Flow 3,099,000,000
Current Assets 96,582,000,000
Current Cash 0
Current Liabilities 89,195,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,387,000,000
Change in NCWC -481,000,000
EBIT 3,537,000,000
Tax Provision 1,438,000,000
Depreciation and Amortization 393,000,000
Capital Expenditure -218,000,000
Unlevered Free Cash Flow 1,793,000,000
Current Assets 88,853,000,000
Current Cash 0
Current Liabilities 80,985,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,868,000,000
Change in NCWC 258,000,000
EBIT 3,665,000,000
Tax Provision 1,263,000,000
Depreciation and Amortization 351,000,000
Capital Expenditure -179,000,000
Unlevered Free Cash Flow 2,828,890,864
Current Assets 83,271,000,000
Current Cash 0
Current Liabilities 75,661,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,610,000,000
Change in NCWC 39,000,000
EBIT 3,630,000,000
Tax Provision 1,315,000,000
Depreciation and Amortization 391,000,000
Capital Expenditure -168,000,000
Unlevered Free Cash Flow 2,570,446,843
Current Assets 79,562,000,000
Current Cash 0
Current Liabilities 71,991,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,571,000,000
Change in NCWC 251,000,000
EBIT 3,694,000,000
Tax Provision 1,371,000,000
Depreciation and Amortization 369,000,000
Capital Expenditure -145,000,000
Unlevered Free Cash Flow 2,798,000,000
Current Assets 75,850,000,000
Current Cash 0
Current Liabilities 68,530,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 7,320,000,000
Change in NCWC 1,040,000,000
EBIT 3,926,000,000
Tax Provision 1,474,000,000
Depreciation and Amortization 334,000,000
Capital Expenditure -231,000,000
Unlevered Free Cash Flow 3,601,727,180
Current Assets 71,783,000,000
Current Cash 0
Current Liabilities 65,503,000,000
Current Debt 0
Non-Cash Working Capital (NCWC) 6,280,000,000
Change in NCWC 1,346,284,000
EBIT 3,959,000,000
Tax Provision 1,408,000,000
Depreciation and Amortization 267,000,000
Capital Expenditure -144,000,000
Unlevered Free Cash Flow 3,942,999,694

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