Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Ally Financial (ALLY) and Credit Acceptance (CACC). But which of these two stocks presents investors with the better value opportunity right now? Let's 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.
Ally Financial and Credit Acceptance are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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 9.16, while CACC has a forward P/E of 14.21. We also note that ALLY has a PEG ratio of 0.68. 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. CACC currently has a PEG ratio of 0.89.
Another notable valuation metric for ALLY is its P/B ratio of 1. 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 4.52.
These metrics, and several others, help ALLY earn a Value grade of A, while CACC has been given a Value grade of C.
Both ALLY and CACC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ALLY is the superior value option right now.
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Ally Financial Inc. (ALLY) : Free Stock Analysis Report
Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
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