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Tickers in this Article: COF, DFS, NNI, AEA
As the economy starts crawling out of this recession, payday loan companies and credit providers could benefit. Loans in general are in demand as the last of the personal savings start running out. Also, maximum unemployment insurance terms are being reached, and with school spending right around the corner, many families are scrambling for cash. A peek at loan providers' financials might reveal a couple of bargains and potential winners in this financial sector.

IN PICTURES: Obtaining Credit In A Bad Economy

Looking at P/E: Credit Company Bargains
The following credit companies have seen an increase in quarterly net income. It's no wonder their P/E ratios have been kept in check!

Capital One Financial Corp. (NYSE:COF) is sporting an annual dividend yield of 0.5%, or 20 cents per share, and net income is firmly in the black. In its latest quarterly release, Capital One had diluted earnings per share of $1.33, which came in more than 50% above analysts expectations. This could be the one to watch. Over the last year, the stock is only up 4.5%, but some analysts are expecting a 37% increase in EPS in its next quarter, set to end on September 30, 2010. It that pans out, it's sure to mean good things for this company's investors.

Discover Financial Services (NYSE:DFS) has not convinced as many analysts as Capital One. Analysts are expecting 32 cents earnings per share for the quarter ending August 31, 2010, a significant dip from last year's comparable period of 52 cents. For Discover investors, a share costs eight dollars for every dollar of earnings.

So, if you are looking for the biggest bang for your buck in terms of earnings, Advance America Cash Advance Centers (NYSE:AEA) has a trailing P/E ratio of 4, while Nelnet (NYSE:NNI) has a multiple of 5.

Price to book
The P/B ratio for the most recent quarter paints a bit of a different story. Nelnet has a price to book of just over 1.17 compared to Advanced America's 0.95. Capital One's P/B sits at 0.68, and Discover sits at 1.3. (To get a better understanding of what this means, see Understanding The P/B Ratio at Investopedia Video.)

Current Ratios
The ability to cover current liabilities is just as important for these lenders as it is for their customers. Overextended payments and the inability to collect from borrowers makes for a risker lender - and a riskier investment. As far a the current ratio goes, Advanced America Cash Advance sits at 5.16, Discover Financial Services at 1.33 and Nelnet at 13.37. According to regulatory reports released by lenders last week things are getting better: customers are starting to pay down their debt, and late payments are also decreasing.

The Bottom Line
Companies that provide credit services and loans for consumers have made profit in good times and bad but especially when demand is high and the funds are used for essentials instead of luxury items. As summer dies down and school clothes are purchased, credit services will see a jump in interest income and profits.

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