Investors with an interest in Automotive - Original Equipment stocks have likely encountered both AB Volvo (VLVLY - Free Report) and Spartan Motors (SPAR - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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.
AB Volvo has a Zacks Rank of #2 (Buy), while Spartan Motors has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that VLVLY likely has seen a stronger improvement to its earnings outlook than SPAR has recently. But this is only part of the picture for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
VLVLY currently has a forward P/E ratio of 11.15, while SPAR has a forward P/E of 22.83. We also note that VLVLY has a PEG ratio of 0.74. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. SPAR currently has a PEG ratio of 1.52.
Another notable valuation metric for VLVLY is its P/B ratio of 2.79. 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, SPAR has a P/B of 2.93.
These metrics, and several others, help VLVLY earn a Value grade of A, while SPAR has been given a Value grade of D.
VLVLY sticks out from SPAR in both our Zacks Rank and Style Scores models, so value investors will likely feel that VLVLY is the better option right now.