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Are Investors Undervaluing AutoNation (AN) Right Now?

Zacks Equity Research
·2 min read

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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 should also note that AN holds a PEG ratio of 1.05. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AN's PEG compares to its industry's average PEG of 1.70. Within the past year, AN's PEG has been as high as 4.97 and as low as 0.95, with a median of 2.33.

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. AN has a P/S ratio of 0.3. This compares to its industry's average P/S of 0.4.

Finally, we should also recognize that AN has a P/CF ratio of 6.67. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. AN's P/CF compares to its industry's average P/CF of 11.41. Over the past 52 weeks, AN's P/CF has been as high as 7.78 and as low as 3.22, with a median of 5.93.

These are just a handful of the figures considered in AutoNation's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that AN is an impressive value stock right now.


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