Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of AB Volvo (VLVLY - Free Report) and Visteon (VC - 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.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
AB Volvo has a Zacks Rank of #2 (Buy), while Visteon has a Zacks Rank of #5 (Strong Sell) right now. This means that VLVLY'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.
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.
VLVLY currently has a forward P/E ratio of 8.37, while VC has a forward P/E of 11.48. We also note that VLVLY has a PEG ratio of 0.56. 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. VC currently has a PEG ratio of 0.88.
Another notable valuation metric for VLVLY is its P/B ratio of 2. 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 3.21.
Based on these metrics and many more, VLVLY holds a Value grade of A, while VC has a Value grade of C.
VLVLY 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 VLVLY is likely the superior value option right now.