Back to top

Image: Bigstock

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

Read MoreHide Full Article

Investors interested in stocks from the Automotive - Domestic sector have probably already heard of General Motors Company (GM - Free Report) and Tesla (TSLA - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, General Motors Company has a Zacks Rank of #1 (Strong Buy), while Tesla has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that GM likely has seen a stronger improvement to its earnings outlook than TSLA has recently. But this is only part of the picture for value investors.

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.

GM currently has a forward P/E ratio of 9.66, while TSLA has a forward P/E of 156.82. We also note that GM has a PEG ratio of 0.98. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TSLA currently has a PEG ratio of 4.54.

Another notable valuation metric for GM is its P/B ratio of 1.58. 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, TSLA has a P/B of 27.37.

Based on these metrics and many more, GM holds a Value grade of A, while TSLA has a Value grade of F.

GM has seen stronger estimate revision activity and sports more attractive valuation metrics than TSLA, so it seems like value investors will conclude that GM is the superior option right now.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

General Motors Company (GM) - free report >>

Tesla, Inc. (TSLA) - free report >>

Published in