Investors looking for stocks in the Automotive - Domestic sector might want to consider either Harley-Davidson (HOG) or Tesla (TSLA). 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, Harley-Davidson has a Zacks Rank of #2 (Buy), while Tesla has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that HOG likely has seen a stronger improvement to its earnings outlook than TSLA has recently. 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.
HOG currently has a forward P/E ratio of 7.20, while TSLA has a forward P/E of 148.85. We also note that HOG has a PEG ratio of 0.35. 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. TSLA currently has a PEG ratio of 7.83.
Another notable valuation metric for HOG is its P/B ratio of 0.90. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TSLA has a P/B of 11.99.
These metrics, and several others, help HOG earn a Value grade of A, while TSLA has been given a Value grade of F.
HOG has seen stronger estimate revision activity and sports more attractive valuation metrics than TSLA, so it seems like value investors will conclude that HOG is the superior option right now.
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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.
