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MOD vs. RACE: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Modine (MOD - Free Report) or Ferrari (RACE - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Modine is sporting a Zacks Rank of #1 (Strong Buy), while Ferrari has a Zacks Rank of #3 (Hold). This means that MOD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

MOD currently has a forward P/E ratio of 14.17, while RACE has a forward P/E of 43.88. We also note that MOD has a PEG ratio of 0.57. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RACE currently has a PEG ratio of 3.69.

Another notable valuation metric for MOD is its P/B ratio of 2.59. 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, RACE has a P/B of 17.83.

These metrics, and several others, help MOD earn a Value grade of A, while RACE has been given a Value grade of C.

MOD 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 MOD is likely the superior value option right now.


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