Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Allison Transmission (ALSN) 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, Allison Transmission has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). This means that ALSN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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.
ALSN currently has a forward P/E ratio of 8.18, while RACE has a forward P/E of 43.16. We also note that ALSN has a PEG ratio of 1.17. 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. RACE currently has a PEG ratio of 3.76.
Another notable valuation metric for ALSN is its P/B ratio of 5.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, RACE has a P/B of 16.19.
Based on these metrics and many more, ALSN holds a Value grade of A, while RACE has a Value grade of C.
ALSN 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 ALSN is likely the superior value option right now.
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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
Ferrari N.V. (RACE) : Free Stock Analysis Report
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