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SC vs. FCFS: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
ConocoPhillips (COP) intends to divest its remaining stakes in matured resources in the North Sea.

Investors looking for stocks in the Financial - Consumer Loans sector might want to consider either Santander Consumer (SC) or First Cash Financial Services (FCFS). But which of these two companies is the best option for those looking for undervalued stocks? 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 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, Santander Consumer is sporting a Zacks Rank of #1 (Strong Buy), while First Cash Financial Services has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that SC likely has seen a stronger improvement to its earnings outlook than FCFS has recently. But this is just one piece of the puzzle for value investors.

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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

SC currently has a forward P/E ratio of 7.89, while FCFS has a forward P/E of 23.01. We also note that SC has a PEG ratio of 0.98. 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. FCFS currently has a PEG ratio of 1.14.

Another notable valuation metric for SC is its P/B ratio of 1.04. 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, FCFS has a P/B of 2.73.

These are just a few of the metrics contributing to SC's Value grade of A and FCFS's Value grade of C.

SC 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 SC is likely the superior value option right now.


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Santander Consumer USA Holdings Inc. (SC) : Free Stock Analysis Report
 
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