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TOWR or RACE: Which Is the Better Value Stock Right Now?

Investors interested in Automotive - Original Equipment stocks are likely familiar with Tower International (TOWR) 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.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Tower International has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TOWR has an improving earnings outlook. 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 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.

TOWR currently has a forward P/E ratio of 5.84, while RACE has a forward P/E of 27.48. We also note that TOWR has a PEG ratio of 0.73. 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 1.70.

Another notable valuation metric for TOWR is its P/B ratio of 1.59. 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 12.96.

These are just a few of the metrics contributing to TOWR's Value grade of A and RACE's Value grade of D.

TOWR has seen stronger estimate revision activity and sports more attractive valuation metrics than RACE, so it seems like value investors will conclude that TOWR is the superior 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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