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GPI or AN: Which Is the Better Value Stock Right Now?

Zacks Equity Research
NBT (NBTB) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Investors looking for stocks in the Automotive - Retail and Whole Sales sector might want to consider either Group 1 Automotive (GPI) or AutoNation (AN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, Group 1 Automotive is sporting a Zacks Rank of #2 (Buy), while AutoNation has a Zacks Rank of #5 (Strong Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that GPI has an improving earnings outlook. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

GPI currently has a forward P/E ratio of 7.56, while AN has a forward P/E of 9.02. We also note that GPI has a PEG ratio of 1.87. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. AN currently has a PEG ratio of 3.51.

Another notable valuation metric for GPI is its P/B ratio of 1.22. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AN has a P/B of 1.24.

These metrics, and several others, help GPI earn a Value grade of B, while AN has been given a Value grade of C.

GPI stands above AN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GPI is the superior value option right now.


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