American Express vs Discover Financial Services Which Is Stronger?

American Express and Discover Financial Services are two major players in the financial services industry, offering credit cards, payment services, and other financial products to consumers and businesses. Both companies have strong track records of delivering solid financial results and have a loyal customer base. However, they each have unique strengths and strategies that differentiate them in the market. Investors interested in financial services stocks may want to consider the strengths and weaknesses of American Express and Discover Financial Services before making investment decisions.

American Express or Discover Financial Services?

When comparing American Express and Discover Financial Services, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between American Express and Discover Financial Services.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. American Express has a dividend yield of 0.89%, while Discover Financial Services has a dividend yield of 1.59%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. American Express reports a 5-year dividend growth of 10.01% year and a payout ratio of 19.64%. On the other hand, Discover Financial Services reports a 5-year dividend growth of 12.47% year and a payout ratio of 24.19%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with American Express P/E ratio at 21.63 and Discover Financial Services's P/E ratio at 13.84. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. American Express P/B ratio is 7.20 while Discover Financial Services's P/B ratio is 2.56.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, American Express has seen a 5-year revenue growth of 0.74%, while Discover Financial Services's is 0.24%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with American Express's ROE at 34.09% and Discover Financial Services's ROE at 20.30%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $301.25 for American Express and $175.47 for Discover Financial Services. Over the past year, American Express's prices ranged from $177.50 to $307.82, with a yearly change of 73.42%. Discover Financial Services's prices fluctuated between $96.46 and $188.26, with a yearly change of 95.17%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.