Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Autoliv (ALV - Free Report) and Visteon (VC - 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 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, both Autoliv and Visteon are sporting a Zacks Rank of # 1 (Strong Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ALV currently has a forward P/E ratio of 12.30, while VC has a forward P/E of 18.94. We also note that ALV has a PEG ratio of 0.97. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. VC currently has a PEG ratio of 1.26.
Another notable valuation metric for ALV is its P/B ratio of 2.09. 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. By comparison, VC has a P/B of 6.40.
These are just a few of the metrics contributing to ALV's Value grade of B and VC's Value grade of C.
Both ALV and VC are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ALV is the superior value option right now.