Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Phinia (PHIN) or Modine (MOD). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Phinia has a Zacks Rank of #1 (Strong Buy), while Modine has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that PHIN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
PHIN currently has a forward P/E ratio of 9.75, while MOD has a forward P/E of 17.77. We also note that PHIN has a PEG ratio of 0.44. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MOD currently has a PEG ratio of 0.52.
Another notable valuation metric for PHIN is its P/B ratio of 1.06. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MOD has a P/B of 4.98.
These are just a few of the metrics contributing to PHIN's Value grade of A and MOD's Value grade of C.
PHIN stands above MOD thanks to its solid earnings outlook, and based on these valuation figures, we also feel that PHIN is the superior value 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.
