Back to top

Image: Bigstock

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

Read MoreHide Full Article

Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Capital One (COF - Free Report) and Credit Acceptance (CACC - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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 Credit Acceptance has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that COF likely has seen a stronger improvement to its earnings outlook than CACC has recently. But this is just one factor that value investors are interested in.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

COF currently has a forward P/E ratio of 8.36, while CACC has a forward P/E of 14.53. We also note that COF has a PEG ratio of 0.78. 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 COF is its P/B ratio of 0.90. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CACC has a P/B of 4.38.

These metrics, and several others, help COF earn a Value grade of A, while CACC has been given a Value grade of C.

COF has seen stronger estimate revision activity and sports more attractive valuation metrics than CACC, so it seems like value investors will conclude that COF is the superior option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Capital One Financial Corporation (COF) - free report >>

Credit Acceptance Corporation (CACC) - free report >>