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ESNT vs. TREE: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Financial - Mortgage & Related Services stocks have likely encountered both Essent Group (ESNT - Free Report) and Tree.com (TREE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Both Essent Group and Tree.com have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ESNT currently has a forward P/E ratio of 8.66, while TREE has a forward P/E of 46.35. We also note that ESNT has a PEG ratio of 0.87. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TREE currently has a PEG ratio of 1.28.

Another notable valuation metric for ESNT is its P/B ratio of 1.87. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TREE has a P/B of 9.32.

Based on these metrics and many more, ESNT holds a Value grade of B, while TREE has a Value grade of F.

Both ESNT and TREE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ESNT is the superior value option right now.


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