Investors interested in stocks from the Automotive - Domestic sector have probably already heard of Paccar (PCAR - Free Report) and Fox Factory Holding (FOXF - Free Report) . 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 is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both Paccar and Fox Factory Holding have a Zacks Rank of # 2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
PCAR currently has a forward P/E ratio of 10.61, while FOXF has a forward P/E of 26.72. We also note that PCAR has a PEG ratio of 0.98. 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. FOXF currently has a PEG ratio of 1.77.
Another notable valuation metric for PCAR is its P/B ratio of 2.78. 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, FOXF has a P/B of 7.97.
These are just a few of the metrics contributing to PCAR's Value grade of A and FOXF's Value grade of F.
Both PCAR and FOXF are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PCAR is the superior value option right now.