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Should Value Investors Buy Lithia Motors (LAD) Stock?

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One stock to keep an eye on is Lithia Motors (LAD - Free Report) . LAD is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value.

Another valuation metric that we should highlight is LAD's P/B ratio of 2.46. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 2.51. Over the past 12 months, LAD's P/B has been as high as 4.83 and as low as 2.28, with a median of 3.56.

Finally, investors should note that LAD has a P/CF ratio of 10.19. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 10.24. LAD's P/CF has been as high as 18.69 and as low as 9.45, with a median of 14, all within the past year.

These are only a few of the key metrics included in Lithia Motors's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, LAD looks like an impressive value stock at the moment.


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