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ECPG vs. CACC: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Financial - Consumer Loans sector might want to consider either Encore Capital Group (ECPG) or Credit Acceptance (CACC). 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Currently, Encore Capital Group has a Zacks Rank of #2 (Buy), while Credit Acceptance has a Zacks Rank of #5 (Strong Sell). 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.

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.

ECPG currently has a forward P/E ratio of 6.20, while CACC has a forward P/E of 12.31. We also note that ECPG has a PEG ratio of 0.52. 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 1.12.

Another notable valuation metric for ECPG is its P/B ratio of 1.23. 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 3.40.

These are just a few of the metrics contributing to ECPG's Value grade of A and CACC's Value grade of D.

ECPG has seen stronger estimate revision activity and sports more attractive valuation metrics than CACC, 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
 
Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
 
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