Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Continental AG (CTTAY) and Ferrari (RACE). 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.
Continental AG and Ferrari are both sporting a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CTTAY currently has a forward P/E ratio of 9.70, while RACE has a forward P/E of 49.87. We also note that CTTAY has a PEG ratio of 0.72. 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. RACE currently has a PEG ratio of 5.61.
Another notable valuation metric for CTTAY is its P/B ratio of 1.13. 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, RACE has a P/B of 30.81.
Based on these metrics and many more, CTTAY holds a Value grade of A, while RACE has a Value grade of D.
Both CTTAY and RACE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CTTAY is the superior value option right now.
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See This Stock Now for Free >>Continental AG (CTTAY) : Free Stock Analysis Report
Ferrari N.V. (RACE) : 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.
