Investors interested in Financial - Consumer Loans stocks are likely familiar with Encore Capital Group (ECPG - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Encore Capital Group and Credit Acceptance are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
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.
ECPG currently has a forward P/E ratio of 6.46, while CACC has a forward P/E of 13.09. We also note that ECPG has a PEG ratio of 0.43. 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. CACC currently has a PEG ratio of 1.31.
Another notable valuation metric for ECPG is its P/B ratio of 1.25. 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 3.89.
These are just a few of the metrics contributing to ECPG's Value grade of A and CACC's Value grade of C.
Both ECPG and CACC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ECPG is the superior value option right now.