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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 tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now is China Automotive Systems (CAAS). CAAS is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with a P/E ratio of 10.80, which compares to its industry's average of 14.47. Over the last 12 months, CAAS's Forward P/E has been as high as 13.07 and as low as 4.35, with a median of 7.41.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. CAAS has a P/S ratio of 0.22. This compares to its industry's average P/S of 0.48.

Finally, investors should note that CAAS has a P/CF ratio of 4.78. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. CAAS's current P/CF looks attractive when compared to its industry's average P/CF of 7.78. Over the past 52 weeks, CAAS's P/CF has been as high as 6.89 and as low as 2.76, with a median of 4.57.

These are only a few of the key metrics included in China Automotive Systems's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, CAAS looks like an impressive value stock at the moment.


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