Navient (NASDAQ: NAVI) and Discover Financial Services (NYSE:DFS) are both mid-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, earnings, dividends, institutional ownership, valuation, risk and profitability.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Navient and Discover Financial Services, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Navient 0 6 5 0 2.45
Discover Financial Services 1 9 15 0 2.56

Navient currently has a consensus target price of $18.00, indicating a potential upside of 38.36%. Discover Financial Services has a consensus target price of $74.45, indicating a potential upside of 4.68%. Given Navient’s higher probable upside, equities analysts clearly believe Navient is more favorable than Discover Financial Services.

Risk and Volatility

Navient has a beta of 2.37, suggesting that its share price is 137% more volatile than the S&P 500. Comparatively, Discover Financial Services has a beta of 1.53, suggesting that its share price is 53% more volatile than the S&P 500.

Earnings & Valuation

This table compares Navient and Discover Financial Services’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Navient $4.97 billion 0.69 $681.00 million $1.81 7.19
Discover Financial Services $10.50 billion 2.46 $2.39 billion $5.82 12.22

Discover Financial Services has higher revenue and earnings than Navient. Navient 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.

Profitability

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

Net Margins Return on Equity Return on Assets
Navient 10.88% 14.09% 0.43%
Discover Financial Services 20.04% 21.01% 2.38%

Dividends

Navient pays an annual dividend of $0.64 per share and has a dividend yield of 4.9%. Discover Financial Services pays an annual dividend of $1.40 per share and has a dividend yield of 2.0%. Navient pays out 35.4% of its earnings in the form of a dividend. Discover Financial Services pays out 24.1% 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 6 consecutive years.

Institutional & Insider Ownership

92.9% of Navient shares are owned by institutional investors. Comparatively, 85.0% of Discover Financial Services shares are owned by institutional investors. 1.7% of Navient shares are owned by insiders. Comparatively, 1.0% of Discover Financial Services shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Discover Financial Services beats Navient on 12 of the 17 factors compared between the two stocks.

About Navient

Navient Corporation provides asset management and business processing services to education, healthcare and government clients at the federal, state and local levels. The Company holds the portfolio of education loans insured or federally guaranteed under the Federal Family Education Loan Program (FFELP). It operates through four segments: FFELP Loans, Private Education Loans, Business Services and Other. It also holds the portfolio of Private Education Loans. It services its own portfolio of education loans, as well as education loans owned by the United States Department of Education (ED), financial institutions and nonprofit education lenders. It also provides business processing services to education-related clients, such as guaranty agencies and colleges and universities. It provides additional business processing services to a range of other clients, including federal agencies, state and local governments, healthcare systems and other healthcare providers and municipalities.

About Discover Financial Services

Discover Financial Services (DFS) is a direct banking and payment services company. The Company is a bank holding company, as well as a financial holding company. The Company operates through two segments: Direct Banking and Payment Services. It provides direct banking products and services, and payment services through its subsidiaries. It offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company’s Direct Banking segment includes consumer banking and lending products, specifically Discover-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer banking products and services. The Company’s direct banking offers credit cards, student loans, personal loans, home equity loans, and other consumer lending and deposit products. The Payment Services segment includes PULSE, Diners Club and the Company’s Network Partners business.

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