Investors interested in stocks from the Financial - Consumer Loans sector have probably already heard of Ally Financial (ALLY - Free Report) and First Cash Financial Services (FCFS - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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, Ally Financial is sporting a Zacks Rank of #2 (Buy), while First Cash Financial Services has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALLY has an improving earnings outlook. However, value investors will care about much more than just this.
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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
ALLY currently has a forward P/E ratio of 7.10, while FCFS has a forward P/E of 18.88. We also note that ALLY has a PEG ratio of 0.57. 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. FCFS currently has a PEG ratio of 1.26.
Another notable valuation metric for ALLY is its P/B ratio of 0.81. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FCFS has a P/B of 2.62.
Based on these metrics and many more, ALLY holds a Value grade of A, while FCFS has a Value grade of C.
ALLY has seen stronger estimate revision activity and sports more attractive valuation metrics than FCFS, so it seems like value investors will conclude that ALLY is the superior option right now.