Financial services giant Countrywide Credit (NYSE:CFC) tightened 2003 net income guidance to $12.30-$12.45 a share this morning. Since guidance in December was for $12-$13.50 a share, the company is coming in at the lower end of its projected range.

Countrywide's valuation is compelling, however, despite the stock's 52-week rise from $37.87 to its current $71 levels. (That's about 15% below the 52-week high of $81.81 reached back in December.) The stock's now trading at a paltry 5.6-times trailing earnings. Even using the low end of the company's 2004 earnings estimate of $9 to $12 a share, the company is selling at 7.7-times forward earnings. That looks cheap.

With the recent boom in home refinancing slowing down and record-low interest rates expected to rise, such a low multiple means investors are not optimistic about the No. 3 mortage lender's future prospects.

More troubling to many is an increase in Countrywide's subprime funding (i.e., loaning money to more risky accounts). Although subprime mortgage rates are higher, so are the default rates. However, if the economy is entering a growth phase, lending to riskier groups should not be a short-term concern.

And Countrywide's management seems to think its ahead of the curve. The company is looking to capitalize on the downward trend in the mortgage industry to its advantage by gobbling up smaller, down-and-out lenders when the going gets tough. According to a BusinessWeek article posted on Countrywide's website, the company wants to more than double its 13% share of the mortgage market. Leaders Wells Fargo (NYSE:WFC) and Washington Mutual (NYSE:WM) will certainly be fierce opponents for Countrywide as it tries to expand its mortgage reach.

There are challenges, to be sure, facing Countrywide and its continued success. But with the stock so cheap today, the company could continue to handsomely benefit shareholders in the future. And if history serves Countrywide, the lending powerhouse will be in a prime position when the next mortage financing windfall comes along.

W.D. Crotty owns Washington Mutual. You can e-mail W.D. at wdcrotty@fool.com or join him on the Motley Fools discussion boards. For a 30-day free trial to the discussion boards, click here.