A study of analyst recommendations at the major brokerages shows that Discover Financial Services (NYSE:DFS) is the #65 broker analyst pick among those stocks screened by The Online Investor for strong stock buyback activity. To make that list, a stock must have repurchased at least 5% of its outstanding shares over the trailing twelve month period. In forming the rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the list of stocks with strong buyback activity was ranked according to those averages.
Investors are often keenly interested in knowing which companies are buying back their own stock, because companies often will only make such a move if they feel their stock is undervalued. Discover Financial Services is a company with strong buyback activity that is also considered a compelling buy by analysts; a bullish investor could take this to mean that sharp analyst minds came to the same bullish conclusion as the company itself that the stock is a good value, and therefore the stock should do well in the future.
Analysts studying companies buying back their own stock will also factor into their analysis that future earnings will now be spread over a smaller share count, thereby increasing the per-share earnings the remaining shares will enjoy, versus what that same number would have been absent the stock buyback activity.
DFS operates in the Credit Services & Lending sector, among companies like American Express Co. (AXP) which is down about 0.6% today, and S&P Global Inc (SPGI) trading up by about 0.5%. Below is a three month price history chart comparing the stock performance of DFS, versus AXP and SPGI.
DFS is currently trading off about 1.5% midday Tuesday.
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