Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Strattec Security (STRT) or Ferrari (RACE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both Strattec Security and Ferrari are sporting a Zacks Rank of #1 (Strong Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
STRT currently has a forward P/E ratio of 13.48, while RACE has a forward P/E of 47.56. We also note that STRT has a PEG ratio of 1.35. 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. RACE currently has a PEG ratio of 5.35.
Another notable valuation metric for STRT is its P/B ratio of 1.05. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, RACE has a P/B of 29.65.
These are just a few of the metrics contributing to STRT's Value grade of A and RACE's Value grade of F.
Both STRT and RACE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that STRT 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.
