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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Ally Financial has a Zacks Rank of #2 (Buy), while Credit Acceptance has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALLY has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ALLY currently has a forward P/E ratio of 8.29, while CACC has a forward P/E of 13.94. We also note that ALLY has a PEG ratio of 0.59. 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 0.87.
Another notable valuation metric for ALLY is its P/B ratio of 0.88. 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 4.44.
These metrics, and several others, help ALLY earn a Value grade of A, while CACC has been given a Value grade of C.
ALLY has seen stronger estimate revision activity and sports more attractive valuation metrics than CACC, so it seems like value investors will conclude that ALLY is the superior 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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