Investors interested in Automotive - Domestic stocks are likely familiar with Ford Motor Company (F) and Federal Signal (FSS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Ford Motor Company and Federal Signal are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This means that F's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
F currently has a forward P/E ratio of 9.28, while FSS has a forward P/E of 26.24. We also note that F has a PEG ratio of 0.34. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FSS currently has a PEG ratio of 1.87.
Another notable valuation metric for F is its P/B ratio of 1.56. 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, FSS has a P/B of 5.54.
These are just a few of the metrics contributing to F's Value grade of A and FSS's Value grade of C.
F 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 F is likely the superior value option right now.
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Ford Motor Company (F): Free Stock Analysis Report Federal Signal Corporation (FSS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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