Investors interested in Financial - Consumer Loans stocks are likely familiar with 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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 Ally Financial 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.
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 9.06, while CACC has a forward P/E of 13.31. We also note that ALLY has a PEG ratio of 0.67. 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 1.33.
Another notable valuation metric for ALLY is its P/B ratio of 0.92. 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 4.02.
Based on these metrics and many more, ALLY holds a Value grade of A, while CACC has 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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