Is Sonic Automotive (SAH) Stock Undervalued Right Now?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is Sonic Automotive (SAH). SAH is currently sporting a Zacks Rank #2 (Buy), as well as an A grade for Value.

Investors will also notice that SAH has a PEG ratio of 0.71. 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. SAH's PEG compares to its industry's average PEG of 0.81. Over the past 52 weeks, SAH's PEG has been as high as 0.74 and as low as 0.44, with a median of 0.53.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a preferred metric because revenue can't really be manipulated, so sales are often a truer performance indicator. SAH has a P/S ratio of 0.18. This compares to its industry's average P/S of 0.27.

Finally, investors will want to recognize that SAH has a P/CF ratio of 7.68. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 11.04. Over the past year, SAH's P/CF has been as high as 8.00 and as low as 5.06, with a median of 6.41.

These are only a few of the key metrics included in Sonic Automotive's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SAH looks like an impressive value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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