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DFS vs. FCFS: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors looking for stocks in the Financial - Consumer Loans sector might want to consider either Discover (DFS) or 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Both Discover and First Cash Financial Services have a Zacks Rank of # 2 (Buy) right now. 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 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 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.

DFS currently has a forward P/E ratio of 8.91, while FCFS has a forward P/E of 25.17. We also note that DFS has a PEG ratio of 1.05. 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. FCFS currently has a PEG ratio of 1.68.

Another notable valuation metric for DFS is its P/B ratio of 2.37. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FCFS has a P/B of 3.23.

Based on these metrics and many more, DFS holds a Value grade of A, while FCFS has a 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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