While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
Encore Capital Group (ECPG - Free Report) is a stock many investors are watching right now. ECPG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 5.72, while its industry has an average P/E of 7.77. Over the past 52 weeks, ECPG's Forward P/E has been as high as 7.21 and as low as 3.99, with a median of 5.78.
Investors should also note that ECPG holds a PEG ratio of 0.38. 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. ECPG's industry has an average PEG of 0.76 right now. ECPG's PEG has been as high as 0.55 and as low as 0.31, with a median of 0.42, all within the past year.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ECPG has a P/S ratio of 0.79. This compares to its industry's average P/S of 1.55.
Value investors will likely look at more than just these metrics, but the above data helps show that Encore Capital Group is likely undervalued currently. And when considering the strength of its earnings outlook, ECPG sticks out at as one of the market's strongest value stocks.