Investors interested in stocks from the Automotive - Replacement Parts sector have probably already heard of Motorcar Parts (MPAA - Free Report) and Genuine Parts (GPC - 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.
Right now, Motorcar Parts is sporting a Zacks Rank of #2 (Buy), while Genuine Parts has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MPAA has an improving earnings outlook. However, value investors will care about much more than just this.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.
MPAA currently has a forward P/E ratio of 12.15, while GPC has a forward P/E of 18.01. We also note that MPAA has a PEG ratio of 0.49. 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. GPC currently has a PEG ratio of 2.71.
Another notable valuation metric for MPAA is its P/B ratio of 1.75. 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, GPC has a P/B of 4.20.
These are just a few of the metrics contributing to MPAA's Value grade of B and GPC's Value grade of C.
MPAA sticks out from GPC in both our Zacks Rank and Style Scores models, so value investors will likely feel that MPAA is the better option right now.