Investors interested in Automotive - Original Equipment stocks are likely familiar with Dana (DAN) 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Dana and Ferrari are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
DAN currently has a forward P/E ratio of 11.21, while RACE has a forward P/E of 49.17. We also note that DAN has a PEG ratio of 1.08. 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 5.53.
Another notable valuation metric for DAN is its P/B ratio of 1.76. 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 31.3.
Based on these metrics and many more, DAN holds a Value grade of A, while RACE has a Value grade of D.
Both DAN and RACE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DAN is the superior value option right now.
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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.
