Is Encore Capital Group (ECPG) Stock Undervalued 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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 to watch right now is Encore Capital Group (ECPG). ECPG is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 5.07. This compares to its industry's average Forward P/E of 8.22. Over the past 52 weeks, ECPG's Forward P/E has been as high as 6.56 and as low as 2.47, with a median of 5.71.

Investors should also note that ECPG holds a PEG ratio of 0.42. 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 0.72. Within the past year, ECPG's PEG has been as high as 0.97 and as low as 0.21, with a median of 0.45.

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 0.72. This compares to its industry's average P/S of 0.73.

Finally, our model also underscores that ECPG has a P/CF ratio of 4.50. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.05. Within the past 12 months, ECPG's P/CF has been as high as 6.37 and as low as 2.42, with a median of 5.20.

These are only a few of the key metrics included in Encore Capital Group's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, ECPG looks like an impressive value stock at the moment.

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