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Are Investors Undervaluing China Automotive Systems (CAAS) 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.

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

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

China Automotive Systems (CAAS) is a stock many investors are watching right now. CAAS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.04. This compares to its industry's average Forward P/E of 12.06. CAAS's Forward P/E has been as high as 11.20 and as low as 2.80, with a median of 6.52, all within the past year.

Finally, we should also recognize that CAAS has a P/CF ratio of 3.19. 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. CAAS's current P/CF looks attractive when compared to its industry's average P/CF of 6.75. Within the past 12 months, CAAS's P/CF has been as high as 6.89 and as low as -6.21, with a median of 4.02.

These are just a handful of the figures considered in China Automotive Systems'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 CAAS is an impressive value stock right now.


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