Investors looking for stocks in the Financial - Consumer Loans sector might want to consider either Navient (NAVI) or Credit Acceptance (CACC). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Navient is sporting a Zacks Rank of #2 (Buy), while Credit Acceptance has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NAVI has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
NAVI currently has a forward P/E ratio of 4.76, while CACC has a forward P/E of 16.50. We also note that NAVI has a PEG ratio of 0.19. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CACC currently has a PEG ratio of 1.50.
Another notable valuation metric for NAVI is its P/B ratio of 0.94. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, CACC has a P/B of 3.57.
These are just a few of the metrics contributing to NAVI's Value grade of A and CACC's Value grade of F.
NAVI has seen stronger estimate revision activity and sports more attractive valuation metrics than CACC, so it seems like value investors will conclude that NAVI is the superior option right now.
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Navient Corporation (NAVI) : Free Stock Analysis Report
Credit Acceptance Corporation (CACC) : Free Stock Analysis Report
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