Investors with an interest in Automotive - Replacement Parts stocks have likely encountered both LKQ (LKQ - 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.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both LKQ and CarGurus have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LKQ currently has a forward P/E ratio of 14.94, while CARG has a forward P/E of 80.23. We also note that LKQ has a PEG ratio of 1.07. 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. CARG currently has a PEG ratio of 2.01.
Another notable valuation metric for LKQ is its P/B ratio of 2.20. 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, CARG has a P/B of 18.35.
Based on these metrics and many more, LKQ holds a Value grade of B, while CARG has a Value grade of F.
Both LKQ and CARG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that LKQ is the superior value option right now.