Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of BorgWarner (BWA) and Oshkosh (OSK). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
BorgWarner has a Zacks Rank of #2 (Buy), while Oshkosh has a Zacks Rank of #5 (Strong Sell) right now. This means that BWA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
BWA currently has a forward P/E ratio of 8.51, while OSK has a forward P/E of 8.69. We also note that BWA has a PEG ratio of 0.80. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. OSK currently has a PEG ratio of 0.97.
Another notable valuation metric for BWA is its P/B ratio of 1.26. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, OSK has a P/B of 1.65.
These metrics, and several others, help BWA earn a Value grade of A, while OSK has been given a Value grade of C.
BWA has seen stronger estimate revision activity and sports more attractive valuation metrics than OSK, so it seems like value investors will conclude that BWA is the superior option right now.
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Oshkosh Corporation (OSK) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
