Investors with an interest in Automotive - Replacement Parts stocks have likely encountered both SPX (SPXC - Free Report) and Dorman Products (DORM - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
SPX has a Zacks Rank of #2 (Buy), while Dorman Products has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SPXC is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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 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.
SPXC currently has a forward P/E ratio of 14.52, while DORM has a forward P/E of 30.42. We also note that SPXC has a PEG ratio of 1.45. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. DORM currently has a PEG ratio of 2.54.
Another notable valuation metric for SPXC is its P/B ratio of 3.28. 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, DORM has a P/B of 3.31.
These are just a few of the metrics contributing to SPXC's Value grade of B and DORM's Value grade of C.
SPXC 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 SPXC is likely the superior value option right now.