Investors interested in stocks from the Automotive - Foreign sector have probably already heard of Honda Motor (HMC - Free Report) and Auto Trader Group (ATDRY - 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Honda Motor is sporting a Zacks Rank of #2 (Buy), while Auto Trader Group has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that HMC likely has seen a stronger improvement to its earnings outlook than ATDRY 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.
HMC currently has a forward P/E ratio of 7.05, while ATDRY has a forward P/E of 24.17. We also note that HMC has a PEG ratio of 2.43. 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. ATDRY currently has a PEG ratio of 2.88.
Another notable valuation metric for HMC is its P/B ratio of 0.64. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, ATDRY has a P/B of 201.99.
These are just a few of the metrics contributing to HMC's Value grade of A and ATDRY's Value grade of D.
HMC stands above ATDRY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that HMC is the superior value option right now.