Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Ally Financial (ALLY) and First Cash Financial Services (FCFS). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Ally Financial and First Cash Financial Services are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that ALLY likely has seen a stronger improvement to its earnings outlook than FCFS has recently. But this is only part of the picture for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
ALLY currently has a forward P/E ratio of 7.69, while FCFS has a forward P/E of 20.27. We also note that ALLY has a PEG ratio of 0.64. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. FCFS currently has a PEG ratio of 1.35.
Another notable valuation metric for ALLY is its P/B ratio of 0.88. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, FCFS has a P/B of 2.64.
These metrics, and several others, help ALLY earn a Value grade of A, while FCFS has been given a Value grade of D.
ALLY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that ALLY is likely the superior value option right now.