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

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

China Automotive Systems (CAAS - Free Report) is a stock many investors are watching right now. CAAS is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 8.90, which compares to its industry's average of 14.41. CAAS's Forward P/E has been as high as 13.07 and as low as 4.35, with a median of 7.57, all within the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. CAAS has a P/S ratio of 0.18. This compares to its industry's average P/S of 0.43.

Finally, investors should note that CAAS has a P/CF ratio of 3.94. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.78. CAAS's P/CF has been as high as 6.89 and as low as 2.76, with a median of 4.51, all within the past year.

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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