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GM vs. TSLA: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Automotive - Domestic sector might want to consider either General Motors Company (GM - Free Report) or Tesla (TSLA - 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 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.

Right now, General Motors Company is sporting a Zacks Rank of #1 (Strong Buy), while Tesla has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GM 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.

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.

GM currently has a forward P/E ratio of 11.13, while TSLA has a forward P/E of 138.64. We also note that GM has a PEG ratio of 1.13. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. TSLA currently has a PEG ratio of 3.70.

Another notable valuation metric for GM is its P/B ratio of 1.62. 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. For comparison, TSLA has a P/B of 24.19.

These are just a few of the metrics contributing to GM's Value grade of A and TSLA's Value grade of F.

GM sticks out from TSLA in both our Zacks Rank and Style Scores models, so value investors will likely feel that GM is the better option right now.


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