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Are Investors Undervaluing AutoNation (AN) Right Now?

Zacks Equity Research

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, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. 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.

AutoNation (AN) is a stock many investors are watching right now. AN is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 9.67, while its industry has an average P/E of 11.14. AN's Forward P/E has been as high as 11.48 and as low as 7.67, with a median of 9.86, all within the past year.

We should also highlight that AN has a P/B ratio of 1.41. 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 solid versus its industry's average P/B of 1.84. Over the past 12 months, AN's P/B has been as high as 1.61 and as low as 1.09, with a median of 1.37.

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 0.2. This compares to its industry's average P/S of 0.24.

Finally, investors will want to recognize that AN has a P/CF ratio of 6.79. 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 current P/CF looks attractive when compared to its industry's average P/CF of 8.63. AN's P/CF has been as high as 8.42 and as low as 5.22, with a median of 6.65, all within the past year.

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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