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Is Encore Capital Group (ECPG) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Encore Capital Group (ECPG). ECPG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock holds a P/E ratio of 5.77, while its industry has an average P/E of 8.01. Over the last 12 months, ECPG's Forward P/E has been as high as 6.67 and as low as 3.99, with a median of 5.76.

ECPG is also sporting a PEG ratio of 0.48. 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. ECPG's industry has an average PEG of 0.70 right now. Over the past 52 weeks, ECPG's PEG has been as high as 0.97 and as low as 0.31, with a median of 0.42.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. ECPG has a P/S ratio of 0.81. This compares to its industry's average P/S of 1.38.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Encore Capital Group is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, ECPG feels like a great value stock at the moment.


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