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DFS vs. FCFS: Which Stock Is the Better Value Option?

Zacks Equity Research
Clearfield (CLFD) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Investors interested in Financial - Consumer Loans stocks are likely familiar with Discover (DFS) and First Cash Financial Services (FCFS). But which of these two companies is the best option for those looking for undervalued stocks? 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Discover and First Cash Financial Services are both sporting a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

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 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.

DFS currently has a forward P/E ratio of 9.26, while FCFS has a forward P/E of 24.62. We also note that DFS has a PEG ratio of 1.16. 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. FCFS currently has a PEG ratio of 1.64.

Another notable valuation metric for DFS is its P/B ratio of 2.37. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FCFS has a P/B of 3.14.

These are just a few of the metrics contributing to DFS's Value grade of B and FCFS's Value grade of C.

Both DFS and FCFS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DFS is the superior value option right now.


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Discover Financial Services (DFS) : Free Stock Analysis Report
 
First Cash, Inc. (FCFS) : Free Stock Analysis Report
 
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