Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Autoliv, Inc. (ALV) and Modine (MOD). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Autoliv, Inc. has a Zacks Rank of #2 (Buy), while Modine has a Zacks Rank of #3 (Hold). This means that ALV's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ALV currently has a forward P/E ratio of 11.87, while MOD has a forward P/E of 31.02. We also note that ALV has a PEG ratio of 0.85. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. MOD currently has a PEG ratio of 0.91.
Another notable valuation metric for ALV is its P/B ratio of 3.77. 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, MOD has a P/B of 7.13.
Based on these metrics and many more, ALV holds a Value grade of A, while MOD has a Value grade of C.
ALV sticks out from MOD in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALV is the better option right now.
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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
