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PRAA or AXP: Which Is the Better Value Stock Right Now?

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Investors interested in Financial - Miscellaneous Services stocks are likely familiar with PRA Group (PRAA - Free Report) and American Express (AXP - Free Report) . 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.

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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, PRA Group is sporting a Zacks Rank of #1 (Strong Buy), while American Express has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that PRAA likely has seen a stronger improvement to its earnings outlook than AXP has recently. But this is just one factor that value investors are interested in.

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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

PRAA currently has a forward P/E ratio of 8.52, while AXP has a forward P/E of 13.22. We also note that PRAA has a PEG ratio of 0.29. 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. AXP currently has a PEG ratio of 1.30.

Another notable valuation metric for PRAA is its P/B ratio of 0.91. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, AXP has a P/B of 2.86.

These metrics, and several others, help PRAA earn a Value grade of A, while AXP has been given a Value grade of C.

PRAA sticks out from AXP in both our Zacks Rank and Style Scores models, so value investors will likely feel that PRAA is the better option right now.


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