Investors with an interest in Automotive - Replacement Parts stocks have likely encountered both Standard Motor Products (SMP - Free Report) and CarGurus (CARG - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 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.
Currently, Standard Motor Products has a Zacks Rank of #2 (Buy), while CarGurus has a Zacks Rank of #3 (Hold). This means that SMP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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.
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.
SMP currently has a forward P/E ratio of 14.85, while CARG has a forward P/E of 64.45. We also note that SMP has a PEG ratio of 1.35. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CARG currently has a PEG ratio of 1.74.
Another notable valuation metric for SMP is its P/B ratio of 2.12. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CARG has a P/B of 14.37.
These are just a few of the metrics contributing to SMP's Value grade of B and CARG's Value grade of F.
SMP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SMP is likely the superior value option right now.