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ALLY vs. CACC: Which Stock Is the Better Value Option?

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Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Ally Financial (ALLY - Free Report) and Credit Acceptance (CACC - 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.

Currently, Ally Financial has a Zacks Rank of #2 (Buy), while Credit Acceptance has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALLY is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

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.

ALLY currently has a forward P/E ratio of 7.02, while CACC has a forward P/E of 13.57. We also note that ALLY has a PEG ratio of 0.55. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CACC currently has a PEG ratio of 0.79.

Another notable valuation metric for ALLY is its P/B ratio of 0.79. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CACC has a P/B of 4.07.

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

ALLY sticks out from CACC in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALLY is the better option right now.


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