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ALSN vs. HZN: Which Stock Should Value Investors Buy Now?

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Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Allison Transmission (ALSN - Free Report) and Horizon Global . But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, Allison Transmission is sporting a Zacks Rank of #1 (Strong Buy), while Horizon Global has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ALSN likely has seen a stronger improvement to its earnings outlook than HZN has recently. But this is just one factor that value investors are interested in.

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.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ALSN currently has a forward P/E ratio of 10.45, while HZN has a forward P/E of 98.63. We also note that ALSN has a PEG ratio of 1.04. 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. HZN currently has a PEG ratio of 36.39.

Another notable valuation metric for ALSN is its P/B ratio of 10.04. 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, HZN has a P/B of 13.09.

These metrics, and several others, help ALSN earn a Value grade of A, while HZN has been given a Value grade of D.

ALSN stands above HZN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ALSN is the superior value option right now.


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