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ALSN vs. RACE: Which Stock Is the Better Value Option?

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Investors interested in Automotive - Original Equipment stocks are likely familiar with Allison Transmission (ALSN - Free Report) and Ferrari (RACE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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, both Allison Transmission and Ferrari are holding a Zacks Rank of #1 (Strong Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.

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 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 11.02, while RACE has a forward P/E of 36.92. We also note that ALSN has a PEG ratio of 1.10. 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 2.13.

Another notable valuation metric for ALSN is its P/B ratio of 8.41. 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, RACE has a P/B of 22.48.

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

ALSN and RACE are currently sporting an improving earnings outlook, which makes them stick out in our Zacks Rank model. However, 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 >>