Investors interested in Financial - Consumer Loans stocks are likely familiar with Encore Capital Group (ECPG - Free Report) and Credit Acceptance (CACC - 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, both Encore Capital Group and Credit Acceptance are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ECPG currently has a forward P/E ratio of 5.66, while CACC has a forward P/E of 21.40. We also note that ECPG has a PEG ratio of 0.47. 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. CACC currently has a PEG ratio of 1.95.
Another notable valuation metric for ECPG is its P/B ratio of 1.13. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, CACC has a P/B of 3.47.
These metrics, and several others, help ECPG earn a Value grade of B, while CACC has been given a Value grade of D.
Both ECPG and CACC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ECPG is the superior value option right now.