Are Investors Undervaluing AutoNation (AN) Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
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 AutoNation (AN). AN is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
Investors will also notice that AN has a PEG ratio of 0.28. 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's industry currently sports an average PEG of 0.71. Within the past year, AN's PEG has been as high as 1.99 and as low as 0.21, with a median of 0.77.
Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. AN has a P/S ratio of 0.3. This compares to its industry's average P/S of 0.36.
Finally, we should also recognize that AN has a P/CF ratio of 5.56. 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 6.95. Over the past year, AN's P/CF has been as high as 5.56 and as low as 3.18, with a median of 4.06.
If you're looking for another solid Automotive - Retail and Whole Sales value stock, take a look at Group 1 Automotive (GPI). GPI is a # 2 (Buy) stock with a Value score of A.
Group 1 Automotive is trading at a forward earnings multiple of 6.92 at the moment, with a PEG ratio of 2.25. This compares to its industry's average P/E of 8.08 and average PEG ratio of 0.71.
Over the past year, GPI's P/E has been as high as 6.92, as low as 3.66, with a median of 4.93; its PEG ratio has been as high as 2.58, as low as 0.26, with a median of 0.77 during the same time period.
Furthermore, Group 1 Automotive holds a P/B ratio of 1.59 and its industry's price-to-book ratio is 2.43. GPI's P/B has been as high as 1.59, as low as 0.94, with a median of 1.34 over the past 12 months.
Value investors will likely look at more than just these metrics, but the above data helps show that AutoNation and Group 1 Automotive are likely undervalued currently. And when considering the strength of its earnings outlook, AN and GPI sticks out as one of the market's strongest value stocks.
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AutoNation, Inc. (AN) : Free Stock Analysis Report
Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
