Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of China Yuchai (CYD) and Modine (MOD). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both China Yuchai and Modine have a Zacks Rank of #1 (Strong 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 piece of the puzzle for value investors.
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.
CYD currently has a forward P/E ratio of 20.48, while MOD has a forward P/E of 47.15. We also note that CYD has a PEG ratio of 0.36. 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 1.39.
Another notable valuation metric for CYD is its P/B ratio of 1.1. 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 10.61.
Based on these metrics and many more, CYD holds a Value grade of A, while MOD has a Value grade of D.
Both CYD and MOD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CYD is the superior value 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.
