Investors interested in Financial - Consumer Loans stocks are likely familiar with Encore Capital Group (ECPG) and First Cash Financial Services (FCFS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Encore Capital Group and First Cash Financial Services are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ECPG is likely seeing its earnings outlook improve to a greater extent. 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.
ECPG currently has a forward P/E ratio of 6.29, while FCFS has a forward P/E of 21.12. We also note that ECPG has a PEG ratio of 0.42. 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 1.41.
Another notable valuation metric for ECPG is its P/B ratio of 1.21. 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 2.61.
These are just a few of the metrics contributing to ECPG's Value grade of A and FCFS's Value grade of D.
ECPG has seen stronger estimate revision activity and sports more attractive valuation metrics than FCFS, so it seems like value investors will conclude that ECPG is the superior option right now.
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Encore Capital Group Inc (ECPG) : Free Stock Analysis Report
First Cash, Inc. (FCFS) : Free Stock Analysis Report
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