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COF or FCFS: Which Is the Better Value Stock Right Now?

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Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Capital One (COF - Free Report) and First Cash Financial Services (FCFS - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, Capital One is sporting a Zacks Rank of #2 (Buy), while First Cash Financial Services has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that COF has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

COF currently has a forward P/E ratio of 8.24, while FCFS has a forward P/E of 23. We also note that COF has a PEG ratio of 0.77. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FCFS currently has a PEG ratio of 1.14.

Another notable valuation metric for COF is its P/B ratio of 0.93. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FCFS has a P/B of 2.72.

These are just a few of the metrics contributing to COF's Value grade of A and FCFS's Value grade of C.

COF stands above FCFS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that COF is the superior value option right now.


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