Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Strattec Security (STRT) or Ferrari (RACE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Strattec Security has a Zacks Rank of #1 (Strong Buy), while Ferrari has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STRT has an improving earnings outlook. But this is only part of the picture for value investors.
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.
STRT currently has a forward P/E ratio of 15.24, while RACE has a forward P/E of 49.69. We also note that STRT has a PEG ratio of 1.52. 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. RACE currently has a PEG ratio of 4.
Another notable valuation metric for STRT is its P/B ratio of 0.76. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RACE has a P/B of 28.76.
These are just a few of the metrics contributing to STRT's Value grade of A and RACE's Value grade of C.
STRT has seen stronger estimate revision activity and sports more attractive valuation metrics than RACE, so it seems like value investors will conclude that STRT is the superior option right now.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
