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DFS or FCFS: Which Is the Better Value Stock Right Now?


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Investors interested in Financial - Consumer Loans stocks are likely familiar with Discover (DFS) and First Cash Financial Services (FCFS). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Discover and First Cash Financial Services are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DFS has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

DFS currently has a forward P/E ratio of 9.71, while FCFS has a forward P/E of 22.32. We also note that DFS has a PEG ratio of 0.78. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. FCFS currently has a PEG ratio of 1.11.

Another notable valuation metric for DFS is its P/B ratio of 2.52. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, FCFS has a P/B of 2.64.

Based on these metrics and many more, DFS holds a Value grade of A, while FCFS has a Value grade of C.

DFS stands above FCFS thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DFS is the superior value option right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: DFS , FCFS



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