Analyzing FirstCash (NASDAQ:FCFS) and Encore Capital Group (NASDAQ:ECPG)

Encore Capital Group (NASDAQ:ECPG) and FirstCash (NASDAQ:FCFS) are both mid-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, profitability, institutional ownership, analyst recommendations, risk and valuation.

Volatility and Risk

Encore Capital Group has a beta of 1.27, indicating that its share price is 27% more volatile than the S&P 500. Comparatively, FirstCash has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Encore Capital Group and FirstCash, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Encore Capital Group	0	0	5	1	3.17
FirstCash	0	1	4	0	2.80

Encore Capital Group presently has a consensus price target of $89.75, suggesting a potential downside of 7.04%. FirstCash has a consensus price target of $249.00, suggesting a potential upside of 13.13%. Given FirstCash’s higher probable upside, analysts clearly believe FirstCash is more favorable than Encore Capital Group.

Profitability

This table compares Encore Capital Group and FirstCash’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Encore Capital Group	15.86%	29.83%	5.58%
FirstCash	9.42%	19.65%	8.38%

Insider & Institutional Ownership

80.3% of FirstCash shares are held by institutional investors. 3.0% of Encore Capital Group shares are held by insiders. Comparatively, 2.9% of FirstCash shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Encore Capital Group and FirstCash”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Encore Capital Group	$1.77 billion	1.16	$256.83 million	$13.21	7.31
FirstCash	$4.12 billion	2.32	$330.38 million	$8.76	25.13

FirstCash has higher revenue and earnings than Encore Capital Group. Encore Capital Group is trading at a lower price-to-earnings ratio than FirstCash, indicating that it is currently the more affordable of the two stocks.

Summary

Encore Capital Group beats FirstCash on 8 of the 15 factors compared between the two stocks.

About Encore Capital Group

Encore Capital Group, Inc., a specialty finance company, provides debt recovery solutions and other related services for consumers across financial assets worldwide. The company purchases portfolios of defaulted consumer receivables at deep discounts to face value, as well as manages them by working with individuals as they repay their obligations and works toward financial recovery. It is also involved in the provision of early stage collection, business process outsourcing, and contingent collection services. In addition, the company engages in debt servicing and other portfolio management services to credit originator for non-performing loans. Further, it offers credit management services. Encore Capital Group, Inc. was incorporated in 1999 and is headquartered in San Diego, California.

About FirstCash

FirstCash Holdings, Inc, together with its subsidiaries, operates retail pawn stores in the United States, Mexico, and rest of Latin America. The company operates in three segments: U.S. Pawn, Latin America Pawn, and Retail POS Payment Solutions segments. Its pawn stores lend money on the collateral of pledged personal property, including jewelry, electronics, tools, appliances, sporting goods, and musical instruments; and retails merchandise acquired through collateral forfeitures on forfeited pawn loans and over-the-counter purchases of merchandise directly from customers. The company also provides retail POS payment solutions, which focuses on LTO products and facilitating other retail financing payment options across the network of traditional and e-commerce merchant partners. It serves cash and credit-constrained consumers. The company was formerly known as FirstCash, Inc and changed its name to FirstCash Holdings, Inc. in December 2021. FirstCash Holdings, Inc was incorporated in 1988 and is headquartered in Fort Worth, Texas.