Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Visteon (VC) or Ferrari (RACE). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Currently, Visteon has a Zacks Rank of #1 (Strong Buy), while Ferrari has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that VC likely has seen a stronger improvement to its earnings outlook than RACE has recently. However, value investors will care about much more than just this.
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.
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 14.35, while RACE has a forward P/E of 47.66. We also note that VC has a PEG ratio of 2.86. 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 5.36.
Another notable valuation metric for VC is its P/B ratio of 2.27. 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 28.77.
Based on these metrics and many more, VC holds a Value grade of A, while RACE has a Value grade of D.
VC sticks out from RACE in both our Zacks Rank and Style Scores models, so value investors will likely feel that VC is the better 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.
