Investors interested in stocks from the Financial - Consumer Loans sector have probably already heard of Encore Capital Group (ECPG) and 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.
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 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.
Right now, Encore Capital Group is sporting a Zacks Rank of #1 (Strong Buy), while Credit Acceptance has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that ECPG likely has seen a stronger improvement to its earnings outlook than CACC has recently. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
ECPG currently has a forward P/E ratio of 6.28, while CACC has a forward P/E of 14.09. We also note that ECPG has a PEG ratio of 0.48. 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. CACC currently has a PEG ratio of 0.88.
Another notable valuation metric for ECPG is its P/B ratio of 1.22. 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, CACC has a P/B of 4.48.
These metrics, and several others, help ECPG earn a Value grade of B, while CACC has been given a Value grade of C.
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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