Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put EZCORP, Inc. EZPW stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, EZCORP has a trailing twelve months PE ratio of 10.79, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.11. If we focus on the long-term PE trend EZCORP’s current PE level puts it above its midpoint over the past five years.
Further, the stock’s PE also compares pretty favorably with the Zacks - Finance sector’s trailing twelve months PE ratio, which stands at 13.75. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that EZCORP has a forward PE ratio (price relative to this year’s earnings) of just 9.44, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term too.
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, EZCORP has a P/S ratio of about 0.6. This is lower than the S&P 500 average, which comes in at 3.07x right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, this suggests some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, EZCORP currently has a Value Score of B, putting it into the top 40% of all stocks we cover from this look. This makes the stock a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio comes in at 5.49, which is better than the industry average of 6.14. Clearly, the stock is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though EZPW might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of B and a Momentum Score of D. This gives EZPW a Zacks VGM score — or its overarching fundamental grade — of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current year has seen one upward revision with no downward movement in the past sixty days. For the next year, the estimate has seen one downward revision in the same time period with no movement in the opposite direction.
This has had an impact on the consensus estimate as the current year consensus estimate has decreased 2.1% in the past two months, while the next year estimate rose 5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
EZCORP, Inc. Price and Consensus
EZCORP, Inc. price-consensus-chart | EZCORP, Inc. Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
EZCORP is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Further, a strong industry rank (among Top 7% of more than 250 industries) and Zacks Rank #3, supports the company overall.
However, over the past two years, the Zacks Finance – Consumer Loans industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for industry trends, estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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