LX vs. FCFS: Which Stock Is the Better Value Option?
Investors with an interest in Financial - Consumer Loans stocks have likely encountered both Lexinfintech Holdings (LX) and First Cash Financial Services (FCFS). But which of these two stocks presents investors with the better value opportunity right now? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Lexinfintech Holdings is sporting a Zacks Rank of #2 (Buy), while First Cash Financial Services has a Zacks Rank of #3 (Hold). This means that LX's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
LX currently has a forward P/E ratio of 5.04, while FCFS has a forward P/E of 22.97. We also note that LX has a PEG ratio of 0.37. 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. FCFS currently has a PEG ratio of 1.53.
Another notable valuation metric for LX is its P/B ratio of 2.03. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, FCFS has a P/B of 2.90.
These metrics, and several others, help LX earn a Value grade of A, while FCFS has been given a Value grade of C.
LX has seen stronger estimate revision activity and sports more attractive valuation metrics than FCFS, so it seems like value investors will conclude that LX is the superior 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.