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.
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 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.
Currently, General Motors has a Zacks Rank of #2 (Buy), while Polaris Inc has a Zacks Rank of #5 (Strong Sell). 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. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
GM currently has a forward P/E ratio of 5.08, while PII has a forward P/E of 19.58. We also note that GM has a PEG ratio of 0.40. 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. PII currently has a PEG ratio of 6.59.
Another notable valuation metric for GM is its P/B ratio of 0.78. 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 2.62.
These are just a few of the metrics contributing to GM's Value grade of A and PII's Value grade of C.
GM stands above PII thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GM is the superior value option right now.
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