Investors with an interest in Automotive - Domestic stocks have likely encountered both Paccar (PCAR) and Tesla (TSLA). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Paccar has a Zacks Rank of #2 (Buy), while Tesla has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PCAR has 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 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.
PCAR currently has a forward P/E ratio of 24.56, while TSLA has a forward P/E of 233.69. We also note that PCAR has a PEG ratio of 2.46. 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. TSLA currently has a PEG ratio of 6.68.
Another notable valuation metric for PCAR is its P/B ratio of 2.90. 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, TSLA has a P/B of 39.05.
These metrics, and several others, help PCAR earn a Value grade of B, while TSLA has been given a Value grade of F.
PCAR sticks out from TSLA in both our Zacks Rank and Style Scores models, so value investors will likely feel that PCAR is the better option right now.
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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.