Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Lexinfintech Holdings (LX) 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Lexinfintech Holdings has a Zacks Rank of #1 (Strong Buy), while Credit Acceptance has a Zacks Rank of #5 (Strong Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that LX is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
LX currently has a forward P/E ratio of 6.45, while CACC has a forward P/E of 15.88. We also note that LX has a PEG ratio of 0.37. 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 1.44.
Another notable valuation metric for LX is its P/B ratio of 3.16. 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 3.44.
These metrics, and several others, help LX earn a Value grade of B, while CACC has been given a Value grade of F.
LX is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that LX is likely the superior value option right now.
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