Investors looking for stocks in the Automotive - Domestic sector might want to consider either Paccar (PCAR - Free Report) or Fox Factory Holding (FOXF - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Paccar and Fox Factory Holding are both sporting 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 10.94, while FOXF has a forward P/E of 30.86. We also note that PCAR has a PEG ratio of 1.30. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. FOXF currently has a PEG ratio of 2.04.
Another notable valuation metric for PCAR is its P/B ratio of 2.87. 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 9.21.
Based on these metrics and many more, PCAR holds a Value grade of A, while FOXF has a 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.