ATMU vs. RACE: Which Stock Is the Better Value Option?

Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Atmus Filtration Technologies (ATMU) and Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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.

Atmus Filtration Technologies has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ATMU is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ATMU currently has a forward P/E ratio of 20.03, while RACE has a forward P/E of 37.25. We also note that ATMU has a PEG ratio of 3.46. 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 4.20.

Another notable valuation metric for ATMU is its P/B ratio of 12.9. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, RACE has a P/B of 21.57.

Based on these metrics and many more, ATMU holds a Value grade of B, while RACE has a Value grade of D.

ATMU sticks out from RACE in both our Zacks Rank and Style Scores models, so value investors will likely feel that ATMU is the better option right now.

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

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