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ALSN or RACE: Which Is the Better Value Stock Right Now?

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Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Allison Transmission (ALSN - Free Report) or Ferrari (RACE - Free Report) . 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.

Allison Transmission and Ferrari are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ALSN has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.

ALSN currently has a forward P/E ratio of 10.27, while RACE has a forward P/E of 50.99. We also note that ALSN has a PEG ratio of 1.47. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RACE currently has a PEG ratio of 5.07.

Another notable valuation metric for ALSN is its P/B ratio of 5.69. 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 29.05.

These are just a few of the metrics contributing to ALSN's Value grade of A and RACE's Value grade of C.

ALSN 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 ALSN is likely the superior value option right now.


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Allison Transmission Holdings, Inc. (ALSN) - free report >>

Ferrari N.V. (RACE) - free report >>

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