Are Investors Undervaluing Asbury Automotive Group (ABG) Right Now?
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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One company value investors might notice is Asbury Automotive Group (ABG). ABG is currently sporting a Zacks Rank of #2 (Buy) and an A for Value.
Investors will also notice that ABG has a PEG ratio of 0.35. 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. ABG's industry has an average PEG of 0.90 right now. Within the past year, ABG's PEG has been as high as 0.45 and as low as 0.23, with a median of 0.28.
We should also highlight that ABG has a P/B ratio of 1.51. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.89. Over the past 12 months, ABG's P/B has been as high as 2.13 and as low as 1.18, with a median of 1.59.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. ABG has a P/S ratio of 0.28. This compares to its industry's average P/S of 0.31.
Finally, we should also recognize that ABG has a P/CF ratio of 4.06. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 5.28. Over the past year, ABG's P/CF has been as high as 6.37 and as low as 3.56, with a median of 4.70.
Another great Automotive - Retail and Whole Sales stock you could consider is AutoNation (AN), which is a # 2 (Buy) stock with a Value Score of A.
AutoNation is currently trading with a Forward P/E ratio of 6.23 while its PEG ratio sits at 1.76. Both of the company's metrics compare favorably to its industry's average P/E of 6.26 and average PEG ratio of 0.90.
AN's Forward P/E has been as high as 8.13 and as low as 4.47, with a median of 5.50. During the same time period, its PEG ratio has been as high as 1.99, as low as 0.19, with a median of 0.69.
Additionally, AutoNation has a P/B ratio of 3.08 while its industry's price-to-book ratio sits at 1.89. For AN, this valuation metric has been as high as 3.81, as low as 2.10, with a median of 2.81 over the past year.
Value investors will likely look at more than just these metrics, but the above data helps show that Asbury Automotive Group and AutoNation are likely undervalued currently. And when considering the strength of its earnings outlook, ABG and AN sticks out as one of the market's strongest value stocks.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Asbury Automotive Group, Inc. (ABG) : Free Stock Analysis Report
AutoNation, Inc. (AN) : Free Stock Analysis Report
To read this article on Zacks.com click here.