Encore Capital Group, Inc. (ECPG - Free Report) looks like a good investment option right now, driven by strong fundamentals, and good earnings and sales growth prospects.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 3.9% upward over the past 30 days, reflecting that analysts are optimistic regarding its earnings growth potential. Thus, the stock currently carries a Zacks Rank #2 (Buy).
Moreover, the company’s price performance looks impressive. Its shares have gained 55.4% so far this year, outperforming 28.5% growth recorded by the industry.
Here are a few other aspects that make Encore Capital an attractive investment option now.
Revenue Strength: The company’s revenues rose at a CAGR of 6.9% over the last five years (2014-2018). The uptrend is expected to continue in the near term as reflected by its projected sales growth rates of 2.8% for 2019 and 3.9% for 2020.
Earnings per Share (EPS) Growth: Encore Capital witnessed EPS growth of 0.6% over the last three-five years. Moreover, the company’s projected earnings growth rates of 13.5% for 2019 and 9.3% for 2020 ensure the continuation of this upward trend.
Further, its long-term (three-five years) EPS growth rate of 15% promises reward for investors.
Notably, the company has a decent earnings surprise history. It recorded average positive earnings surprise of 10.1% over the trailing four quarters.
Superior Return on Equity (ROE): Encore Capital’s ROE is 19.85%, higher than the industry average of 13.60%. This indicates that the company reinvests cash more efficiently than the industry.
Favorable Valuation: The stock looks undervalued right now in terms of its price/sales (P/S) and price/earnings (P/E) ratios. The company has a P/S ratio of 0.84, which is below the industry average of 1.53. Moreover, its P/E (F1) ratio of 6.62 stands lower than the industry average of 7.50.
Further, the stock currently has a Value Score of A. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
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