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Is China Automotive Systems (CAAS) a Great Value Stock Right Now?

Zacks Equity Research

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.

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.

One stock to keep an eye on is China Automotive Systems (CAAS). CAAS is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock holds a P/E ratio of 10.33, while its industry has an average P/E of 12.82. Over the past year, CAAS's Forward P/E has been as high as 11.20 and as low as 3.53, with a median of 7.17.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. CAAS has a P/S ratio of 0.23. This compares to its industry's average P/S of 0.49.

Finally, our model also underscores that CAAS has a P/CF ratio of 4.57. 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. CAAS's current P/CF looks attractive when compared to its industry's average P/CF of 7.64. Over the past 52 weeks, CAAS's P/CF has been as high as 6.89 and as low as -6.21, with a median of 4.24.

These are only a few of the key metrics included in China Automotive Systems's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CAAS looks like an impressive value stock at the moment.


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