Discover Trading at Lower Multiples Than Visa, MasterCard, Amex Despite Topping 4Q Earnings Expectations

The company also announced it repurchased 9.6 million shares in the fourth quarter for $227 million, bringing the total shares repurchased for the program to 18.0 million or $425 million. The drop in the number of shares outstanding also gave the per-share results a boost.

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Also on Thursday, Discovery's board declared a cash dividend of 1 cent per share of common stock, payable on Jan. 19, 2012, to stockholders of record at the close of business on Dec. 29, 2011.

Main services for Discover are credit cards, personal banking, and student loans.

In the fourth quarter, total loans grew 17 percent from the prior year to a record $57.3 billion. The company purchased an additional $2.4 billion in private student loans in the fourth quarter.

Credit card loans grew 3 percent from the prior year to $46.6 billion and Discover card sales volume was up 8 percent to $25 billion.

Revenue rose 13 percent to $1.81 billion, from $1.6 billion last year.

Better customer payment habit and improved economic condition led to a continuous decline in late payments and defaults. The delinquency rate for credit card loans over 30 days past due dropped to 2.39 percent, compared with a 4.06 percent delinquency rate in the same quarter a year earlier. Meanwhile, credit card net charge-off rate declined to 3.24 percent, from 6.95 percent in the fourth quarter of 2010.

As a result, the drop in uncollectable fees enabled Discover to release more of its reserve fund set aside to cover unpaid balances.

Why Is Discover Trading on Multiples Lower than Its Competitors?

However, investors may not expect the stock to see continued robust growth. Despite the company's fourth-quarter's strong performance, investors are cautious about what may come in the longer term.