Investors interested in Automotive - Domestic stocks are likely familiar with General Motors (GM) and Polaris Inc (PII). 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, General Motors has a Zacks Rank of #2 (Buy), while Polaris Inc has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that GM 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 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.
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 5.36, while PII has a forward P/E of 21.19. We also note that GM has a PEG ratio of 0.42. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. PII currently has a PEG ratio of 7.13.
Another notable valuation metric for GM is its P/B ratio of 0.82. 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, PII has a P/B of 2.83.
Based on these metrics and many more, GM holds a Value grade of A, while PII has a Value grade of C.
GM has seen stronger estimate revision activity and sports more attractive valuation metrics than PII, so it seems like value investors will conclude that GM is the superior option right now.
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