Should Value Investors Buy Encore Capital Group (ECPG) Stock?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is Encore Capital Group (ECPG). ECPG is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 5.32. This compares to its industry's average Forward P/E of 7.37. Over the past 52 weeks, ECPG's Forward P/E has been as high as 6.67 and as low as 3.99, with a median of 5.66.
Investors should also note that ECPG holds a PEG ratio of 0.35. 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. ECPG's industry has an average PEG of 0.72 right now. Over the last 12 months, ECPG's PEG has been as high as 0.51 and as low as 0.31, with a median of 0.41.
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 0.74. This compares to its industry's average P/S of 1.26.
These are just a handful of the figures considered in Encore Capital Group's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that ECPG is an impressive value stock right now.
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