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Discover Financial Services (DFS): Industry & Business Stock Drivers

Discover Financial Services (DFS): Industry & Business Stock Drivers. 3Q 2009 to 3Q 2011. Earning Drivers Paper to electronic payments Growths in credit spending Expansion in personal and student loans Business

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Discover Financial Services (DFS): Industry & Business Stock Drivers

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  1. Discover Financial Services (DFS): Industry & Business Stock Drivers 3Q 2009 to 3Q 2011 • Earning Drivers • Paper to electronic payments • Growths in credit spending • Expansion in personal and student loans • Business • 1. 15 billion market cap company purely focused on direct banking & payment service • 2. Leveraging discover card brand in attracting more quality customers • 3. Attractive customer base • Average Age: 44; Average Household Income: $108,000 • 75% are married, have attended college OR have a house • 4. 10% limited direct exposure to Europe

  2. Valuation & Technical • Low Valuation • Trailing P/B of 1.74x; Trailing ROE of 29.9%; PEG of 0.71 • American Express: P/B of 3.05x and ROE of 27.48% • Attractive Technical • Just broke out of a price consolidation phase • Outperformed AMEX Financial, MasterCard, VISA and S&P 500 Index over the past three years • Initial target price of around $35: upside of 30%

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