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Are Investors Undervaluing China Automotive Systems (CAAS) Right Now?

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While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company to watch right now is China Automotive Systems (CAAS - Free Report) . CAAS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with P/E ratio of 7.46 right now. For comparison, its industry sports an average P/E of 10.74. Over the past year, CAAS's Forward P/E has been as high as 11.20 and as low as 2.80, with a median of 6.30.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CAAS has a P/S ratio of 0.13. This compares to its industry's average P/S of 0.36.

Finally, investors should note that CAAS has a P/CF ratio of 3.31. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 6.06. Over the past year, CAAS's P/CF has been as high as 6.89 and as low as -7.17, with a median of 4.02.

These figures are just a handful of the metrics value investors tend to look at, but they help show that China Automotive Systems is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CAAS feels like a great value stock at the moment.


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