Financial Analysis: Discover Financial Services (NYSE:DFS) & Credit Saison (OTCMKTS:CSASF)

Credit Saison (OTCMKTS:CSASF) and Discover Financial Services (NYSE:DFS) are both financial services companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, risk, valuation, profitability and institutional ownership.

Analyst Recommendations

This is a summary of current recommendations for Credit Saison and Discover Financial Services, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Credit Saison	0	0	0	0	N/A
Discover Financial Services	0	12	8	0	2.40

Discover Financial Services has a consensus price target of $136.12, suggesting a potential downside of 4.89%. Given Discover Financial Services’ higher possible upside, analysts clearly believe Discover Financial Services is more favorable than Credit Saison.

Valuation & Earnings

This table compares Credit Saison and Discover Financial Services”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Credit Saison	N/A	N/A	N/A	C$144.02	0.14
Discover Financial Services	$17.40 billion	2.06	$2.94 billion	$8.77	16.32

Discover Financial Services has higher revenue and earnings than Credit Saison. Credit Saison is trading at a lower price-to-earnings ratio than Discover Financial Services, indicating that it is currently the more affordable of the two stocks.

Dividends

Credit Saison pays an annual dividend of C$23.91 per share and has a dividend yield of 120.2%. Discover Financial Services pays an annual dividend of $2.80 per share and has a dividend yield of 2.0%. Credit Saison pays out 16.6% of its earnings in the form of a dividend. Discover Financial Services pays out 31.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Discover Financial Services has raised its dividend for 13 consecutive years. Credit Saison is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Credit Saison and Discover Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Credit Saison	N/A	N/A	N/A
Discover Financial Services	12.88%	20.92%	1.94%

Institutional and Insider Ownership

26.3% of Credit Saison shares are owned by institutional investors. Comparatively, 86.9% of Discover Financial Services shares are owned by institutional investors. 0.7% of Discover Financial Services shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Summary

Discover Financial Services beats Credit Saison on 10 of the 13 factors compared between the two stocks.

About Credit Saison

Credit Saison Co., Ltd. provides leasing, finance, real estate, entertainment, and payment services in Japan and internationally. The company offers credit cards, prepaid and debit cards, smartphone-based services, and information processing services; internet advertisement agency; marketing consulting; temporary staffing; and contracting services. It also engages in the credit guarantee and finance related businesses; real estate business; real estate leasing activities; and digital marketing and asset management services, as well as develops and manages amusement. Further, it involved in the import and sell of lifestyle goods; cleaning, security, and property maintenance services; debt collection; personal loan; life/non-life insurance agency; online ticket system and payment services; digital lending; and sells information security and office disaster prevention related services, etc. The company was formerly known as Seibu Credit Co., Ltd. and changed its name to Credit Saison Co., Ltd. in October 1989. Credit Saison Co., Ltd. was incorporated in 1951 and is headquartered in Tokyo, Japan.

About Discover Financial Services

Discover Financial Services, through its subsidiaries, provides digital banking products and services, and payment services in the United States. It operates in two segments, Digital Banking and Payment Services. The Digital Banking segment offers Discover-branded credit cards to individuals; personal loans, home loans, and other consumer lending; and direct-to-consumer deposit products comprising savings accounts, certificates of deposit, money market accounts, IRA certificates of deposit, IRA savings accounts and checking accounts, and sweep accounts. The Payment Services segment operates the PULSE to access automated teller machines, debit, and electronic funds transfer network; and Diners Club International, a payments network that issues Diners Club branded charge cards and/or provides card acceptance services, as well as offers payment transaction processing and settlement services. The company was incorporated in 1960 and is based in Riverwoods, Illinois.