Investors looking for stocks in the Automotive - Domestic sector might want to consider either General Motors (GM) or Paccar (PCAR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
General Motors and Paccar are sporting Zacks Ranks of #1 (Strong Buy) and #5 (Strong Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GM has an improving earnings outlook. However, value investors will care about much more than just this.
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.
GM currently has a forward P/E ratio of 6.87, while PCAR has a forward P/E of 19.43. We also note that GM has a PEG ratio of 0.98. 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. PCAR currently has a PEG ratio of 4.11.
Another notable valuation metric for GM is its P/B ratio of 0.94. 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, PCAR has a P/B of 2.66.
These metrics, and several others, help GM earn a Value grade of A, while PCAR has been given a Value grade of C.
GM 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 GM is likely the superior value option right now.
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General Motors Company (GM): Free Stock Analysis Report PACCAR Inc. (PCAR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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