The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies. It helps investors assess what the market is willing to pay today for a dollar of a company’s earnings, making it especially relevant when those earnings are stable and growing.

In general, a higher PE ratio can be justified if investors expect above-average earnings growth, strong competitive positioning, or lower risk. Conversely, lower PE ratios typically reflect slower growth or higher uncertainties. Determining what constitutes a “fair” PE ratio means considering how Enova’s prospects compare to its broader industry and specific peers.

Enova International currently trades at a PE of 10.6x. That is just above the average for its Consumer Finance industry, which stands at 10.4x, but below the peer average of 12.7x. However, Simply Wall St’s proprietary “Fair Ratio” for Enova is 14.9x. The Fair Ratio goes further than simple comparisons by factoring in Enova’s unique earnings growth prospects, risk profile, profit margins, industry landscape, and company size. This provides a tailored benchmark that adapts to more nuanced realities.

Comparing the current PE of 10.6x against the Fair Ratio of 14.9x, Enova appears to be undervalued on this basis. This suggests there could be an opportunity for investors looking for value in a profitable business with room to grow.

Result: UNDERVALUED

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Earlier we mentioned that there is an even better way to understand a company’s value, so let’s introduce you to Narratives. A Narrative lets you map out your own story of what matters most for Enova International by connecting real-world events and your perspective on its future to the numbers that drive fair value, like expected revenue, earnings, and margins, rather than just following formulas or basic ratios.

Narratives put you in control, letting you combine your assumptions about what will drive Enova’s business with a financial forecast and, ultimately, a fair value estimate. This approach is available right within the Community page on Simply Wall St’s platform, where millions of investors compare their views and reasoning in real time.

By checking the gap between Fair Value and the current Price, Narratives help clarify if now is the right time to buy or sell. Because they update automatically when news or results come out, your decisions stay current and informed. For example, one investor might tell a bullish Narrative with a high fair value of $140.00, pointing to Enova’s expanding profits in digital lending, while another could see risks and set a much more conservative value at $111.00, focused on regulatory and credit headwinds.

Do you think there’s more to the story for Enova International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include ENVA.

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