ESNT or TREE: Which Is the Better Value Stock Right Now?
Zacks August 9, 2019
Investors interested in stocks from the Financial - Mortgage & Related Services sector have probably already heard of Essent Group (ESNT) and Tree.com (TREE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Currently, Essent Group has a Zacks Rank of #2 (Buy), while Tree.com has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ESNT has an improving earnings outlook. But this is only part of the picture 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ESNT currently has a forward P/E ratio of 8.59, while TREE has a forward P/E of 55.17. We also note that ESNT has a PEG ratio of 0.86. 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. TREE currently has a PEG ratio of 2.35.
Another notable valuation metric for ESNT is its P/B ratio of 1.71. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TREE has a P/B of 10.97.
These metrics, and several others, help ESNT earn a Value grade of B, while TREE has been given a Value grade of F.
ESNT has seen stronger estimate revision activity and sports more attractive valuation metrics than TREE, so it seems like value investors will conclude that ESNT is the superior option right now.
Essent Group Ltd. (ESNT) : Free Stock Analysis Report
LendingTree, Inc. (TREE) : Free Stock Analysis Report
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