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.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.
One company to watch right now is AutoNation (AN). AN is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A.
We also note that AN holds a PEG ratio of 0.47. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AN's PEG compares to its industry's average PEG of 0.56. Within the past year, AN's PEG has been as high as 4.19 and as low as 0.45, with a median of 1.13.
Investors should also recognize that AN has a P/B ratio of 2.32. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.37. Over the past year, AN's P/B has been as high as 2.69 and as low as 1.03, with a median of 1.78.
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. AN has a P/S ratio of 0.34. This compares to its industry's average P/S of 0.47.
Finally, we should also recognize that AN has a P/CF ratio of 7.31. 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. AN's P/CF compares to its industry's average P/CF of 8.83. AN's P/CF has been as high as 9.20 and as low as 3.99, with a median of 6.67, 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 AutoNation is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AN feels like a great value stock at the moment.
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