2 Stocks That Can Rerate Higher Due to Recent Acquisitions
One way a stock can appreciate is if the market rerates the valuation assigned to the underlying company. For instance, if a company generates $5 per share in earnings and garners an earnings multiple of 10 from the market, it will trade at $50 per share. However, if the business improves and shows it can consistently generate better earnings growth, investors may decide the stock deserves an earnings multiple of 12, boosting the stock price to $60 per share. The key for investors is to try to spot the improvement before the market does. Here are two stocks that can rerate higher due to recent acquisitions.Recently, the large credit card company, Capital One Financial (NYSE: COF), completed its acquisition of the consumer lender and payments company Discover Financial Services, a huge deal in the financials sector. The big get for Capital One was Discover's closed-end payments system, which is very rare.The payments landscape is complex, and every credit and debit card transaction involves a network to process it. The largest, most ubiquitous such networks are Visa and Mastercard. These are open payment networks, meaning they allow other companies, like banks, to issue cards to be used on their networks.Continue reading
One way a stock can appreciate is if the market rerates the valuation assigned to the underlying company. For instance, if a company generates $5 per share in earnings and garners an earnings multiple of 10 from the market, it will trade at $50 per share. However, if the business improves and shows it can consistently generate better earnings growth, investors may decide the stock deserves an earnings multiple of 12, boosting the stock price to $60 per share. The key for investors is to try to spot the improvement before the market does. Here are two stocks that can rerate higher due to recent acquisitions.
Recently, the large credit card company, Capital One Financial (NYSE: COF), completed its acquisition of the consumer lender and payments company Discover Financial Services, a huge deal in the financials sector. The big get for Capital One was Discover's closed-end payments system, which is very rare.
The payments landscape is complex, and every credit and debit card transaction involves a network to process it. The largest, most ubiquitous such networks are Visa and Mastercard. These are open payment networks, meaning they allow other companies, like banks, to issue cards to be used on their networks.
