Investors interested in Automotive - Foreign stocks are likely familiar with Fiat Chrysler (FCAU - Free Report) and Auto Trader Group (ATDRY - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Fiat Chrysler has a Zacks Rank of #2 (Buy), while Auto Trader Group has a Zacks Rank of #3 (Hold) right now. This means that FCAU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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.
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.
FCAU currently has a forward P/E ratio of 4.26, while ATDRY has a forward P/E of 21.29. We also note that FCAU has a PEG ratio of 1.52. 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. ATDRY currently has a PEG ratio of 2.53.
Another notable valuation metric for FCAU is its P/B ratio of 0.80. 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, ATDRY has a P/B of 72.57.
Based on these metrics and many more, FCAU holds a Value grade of A, while ATDRY has a Value grade of F.
FCAU sticks out from ATDRY in both our Zacks Rank and Style Scores models, so value investors will likely feel that FCAU is the better option right now.