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Are Investors Undervaluing Sonic Automotive (SAH) Right Now?
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.
Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
One company to watch right now is Sonic Automotive (SAH - Free Report) . SAH is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock holds a P/E ratio of 6.30, while its industry has an average P/E of 8.04. Over the past year, SAH's Forward P/E has been as high as 11.88 and as low as 6.30, with a median of 9.52.
Investors should also recognize that SAH has a P/B ratio of 2.29. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. SAH's current P/B looks attractive when compared to its industry's average P/B of 2.66. SAH's P/B has been as high as 2.83 and as low as 1.94, with a median of 2.30, over the past year.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SAH has a P/S ratio of 0.2. This compares to its industry's average P/S of 0.49.
Finally, investors should note that SAH has a P/CF ratio of 5.98. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 11.14. Within the past 12 months, SAH's P/CF has been as high as 71.61 and as low as 5.06, with a median of 7.48.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Sonic Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, SAH feels like a great value stock at the moment.