Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Modine (MOD) or Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Modine and Ferrari are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
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.
MOD currently has a forward P/E ratio of 30.70, while RACE has a forward P/E of 46.28. We also note that MOD has a PEG ratio of 0.90. 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 3.91.
Another notable valuation metric for MOD is its P/B ratio of 7.32. 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 29.2.
These are just a few of the metrics contributing to MOD's Value grade of B and RACE's Value grade of D.
Both MOD and RACE are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MOD is 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 ReportThis article originally published on Zacks Investment Research (zacks.com).
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