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STOCK WATCH
Capital One Financial: Bank on It
This consumer-lending company has a strong record of product innovation and profitable growth.

The consumer-lending industry has been hit by increases in credit losses during the economic downturn, and Capital One Financial Corp. (COF) hasn't escaped unscathed. But analysts say the loss rate has peaked and should start improving soon.

Not only will stabilizing credit losses help boost earnings at Capital One, but expansion opportunities also should boost the McLean, Va.-based holding company's bottom line.

Capital One controls two bank subsidiaries and an auto financing subsidiary that collectively have more than $59 billion in managed loans. Capital One also is one of the largest providers of MasterCard and Visa credit cards in the world.

A.G. Edwards & Sons analyst Matthew Park says Capital One has a strong track record of product innovation and profitable growth. Capital One's revenue growth rate is three times the industry rate, and its earnings per share have seen 30% compounded annual growth since 1994.

Shares trade at just 11 times the consensus 2003 earnings per share estimate of $4.69.

--Cameron Huddleston



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