Back to top

Image: Bigstock

Is Group 1 Automotive (GPI) Stock Undervalued Right Now?

Read MoreHide Full Article

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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Group 1 Automotive (GPI - Free Report) is a stock many investors are watching right now. GPI is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 4.48 right now. For comparison, its industry sports an average P/E of 5.69. Over the last 12 months, GPI's Forward P/E has been as high as 8.01 and as low as 3.97, with a median of 5.44.

Investors will also notice that GPI has a PEG ratio of 0.32. 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. GPI's industry currently sports an average PEG of 0.33. Over the last 12 months, GPI's PEG has been as high as 0.88 and as low as 0.28, with a median of 0.45.

We should also highlight that GPI has a P/B ratio of 1.51. 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. This stock's P/B looks solid versus its industry's average P/B of 2.16. Over the past 12 months, GPI's P/B has been as high as 2.11 and as low as 1.28, with a median of 1.74.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. GPI has a P/S ratio of 0.2. This compares to its industry's average P/S of 0.32.

Finally, investors will want to recognize that GPI has a P/CF ratio of 4. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. GPI's P/CF compares to its industry's average P/CF of 5.79. Over the past year, GPI's P/CF has been as high as 6.33 and as low as 3.39, with a median of 5.10.

Lithia Motors (LAD - Free Report) may be another strong Automotive - Retail and Whole Sales stock to add to your shortlist. LAD is a # 2 (Buy) stock with a Value grade of A.

Lithia Motors is currently trading with a Forward P/E ratio of 6.54 while its PEG ratio sits at 1.05. Both of the company's metrics compare favorably to its industry's average P/E of 5.69 and average PEG ratio of 0.33.

Over the past year, LAD's P/E has been as high as 14.79, as low as 5.58, with a median of 8.04; its PEG ratio has been as high as 1.88, as low as 0.35, with a median of 0.45 during the same time period.

Lithia Motors sports a P/B ratio of 1.74 as well; this compares to its industry's price-to-book ratio of 2.16. In the past 52 weeks, LAD's P/B has been as high as 2.73, as low as 1.50, with a median of 1.96.

Value investors will likely look at more than just these metrics, but the above data helps show that Group 1 Automotive and Lithia Motors are likely undervalued currently. And when considering the strength of its earnings outlook, GPI and LAD sticks out as one of the market's strongest value stocks.


In-Depth Zacks Research for the Tickers Above


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


Group 1 Automotive, Inc. (GPI) - free report >>

Lithia Motors, Inc. (LAD) - free report >>

Published in