Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Navient (NAVI) and Credit Acceptance (CACC). 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Navient and Credit Acceptance are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NAVI is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.
NAVI currently has a forward P/E ratio of 4.75, while CACC has a forward P/E of 19.91. We also note that NAVI has a PEG ratio of 0.26. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CACC currently has a PEG ratio of 1.81.
Another notable valuation metric for NAVI is its P/B ratio of 0.94. 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, CACC has a P/B of 3.35.
These are just a few of the metrics contributing to NAVI's Value grade of A and CACC's Value grade of D.
NAVI sticks out from CACC in both our Zacks Rank and Style Scores models, so value investors will likely feel that NAVI is the better option right now.