Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Modine (MOD) and Ferrari (RACE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Currently, Modine has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). This means that MOD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
MOD currently has a forward P/E ratio of 9.37, while RACE has a forward P/E of 43.69. We also note that MOD has a PEG ratio of 0.37. 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 3.87.
Another notable valuation metric for MOD is its P/B ratio of 1.82. 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 16.37.
These are just a few of the metrics contributing to MOD's Value grade of A and RACE's Value grade of C.
MOD 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 MOD is likely the superior value option right now.
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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
Ferrari N.V. (RACE) : Free Stock Analysis Report
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