Are Investors Undervaluing Encore Capital Group (ECPG) Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company value investors might notice is Encore Capital Group (ECPG). ECPG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 5.24 right now. For comparison, its industry sports an average P/E of 7.04. ECPG's Forward P/E has been as high as 9.47 and as low as 3.99, with a median of 6.78, all within the past year.
Investors will also notice that ECPG has a PEG ratio of 0.40. 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. ECPG's PEG compares to its industry's average PEG of 0.58. ECPG's PEG has been as high as 0.73 and as low as 0.31, with a median of 0.53, all within the past year.
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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ECPG has a P/S ratio of 0.61. This compares to its industry's average P/S of 1.25.
Value investors will likely look at more than just these metrics, but the above data helps show that Encore Capital Group is likely undervalued currently. And when considering the strength of its earnings outlook, ECPG sticks out at as one of the market's strongest value stocks.
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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.