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Discover (NYSE:DFS) has always had a chicken-and-egg problem.

Its credit card offered lower discounts than rivals like Visa (NYSE:V), but merchants found few customers had them. It offered consumers better deals than Visa, but few merchants took them.

However, over the last year the stock has been on fire. It's up 65% in that time. Since the bottom of the great recession, in early 2009, the stock has quadrupled. It's now pacing the group, and with its PayPal deal it has gotten yet another pop.

But look closely before you see the momentum, notice that its P/E still trails those of Visa and MasterCard (NYSE:MA) by more than the Atlanta Braves trail the Washington Nationals, and call your bookie (uh, broker).

Discover is not just another U.S. credit card company. It's more like a bank. As Trefis notes, it has recently gotten into student loans and home mortgages. Its PULSE network, acquired in 2005, makes it a major processor of other cards' transactions. The company is taking the old Diners Club brand to China and is aligned with Google Wallet.

Taken all together, the company's strategy seems aimed at becoming more like American Express (NYSE:AXP) than either MasterCard or Visa, a company that doesn't just process transactions or enable commerce but participates like a bank. AXP's P/E, by the way, is about 13.5. You might say the Discover deficit there is more like that of Tampa Bay vs. the Yankees, a gap rather than a chasm.

All this means there is added risk, and more banking risk than the card networks have to handle. There's also a brewing scandal that could cost 20 cents per share, and its growth in cards still trails the group.

Look at the financials and you can also wonder what the fuss is about. Income has been up-and-down, the net change in cash has only turned positive in the last six months, and options action indicates a pretty small trading range of plus or minus $5/share.

If you're buying DFS, in other words, you're betting that people will be paying back new loans, that China is not going to unravel, and that it can grow from what is currently a small base. But with an 8.9 P/E and management that looks to be seeking the main chance, economic bulls may find that a bet worth taking.

Source: Discover Not What You Think It Is