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Are Investors Undervaluing AutoNation (AN) Right Now?

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Zacks Equity Research
·2 min read
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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 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 1.06. 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 1.72. Over the past 52 weeks, AN's PEG has been as high as 4.97 and as low as 0.95, with a median of 2.62.

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 prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. AN has a P/S ratio of 0.29. This compares to its industry's average P/S of 0.4.

Finally, investors should note that AN has a P/CF ratio of 6.60. 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. This stock's P/CF looks attractive against its industry's average P/CF of 11.41. Within the past 12 months, AN's P/CF has been as high as 8.31 and as low as 3.22, with a median of 5.93.

Value investors will likely look at more than just these metrics, but the above data helps show that AutoNation is likely undervalued currently. And when considering the strength of its earnings outlook, AN sticks out at as one of the market's strongest value stocks.


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