Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Visteon (VC) and Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Visteon and Ferrari are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that VC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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.
VC currently has a forward P/E ratio of 12.84, while RACE has a forward P/E of 37.92. We also note that VC has a PEG ratio of 2.75. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. RACE currently has a PEG ratio of 4.16.
Another notable valuation metric for VC is its P/B ratio of 2.1. 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 23.62.
Based on these metrics and many more, VC holds a Value grade of A, while RACE has a Value grade of D.
VC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that VC is likely the superior value option right now.
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Today, See These 5 Potential Home Runs >>Visteon Corporation (VC) : Free Stock Analysis Report
Ferrari N.V. (RACE) : Free Stock Analysis Report
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.
