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Are Investors Undervaluing Group 1 Automotive (GPI) Right Now?

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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.

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

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.

Group 1 Automotive (GPI) is a stock many investors are watching right now. GPI is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 6.77 right now. For comparison, its industry sports an average P/E of 8.32. Over the last 12 months, GPI's Forward P/E has been as high as 9.67 and as low as 6.39, with a median of 7.78.

Investors should also recognize that GPI has a P/B ratio of 1.81. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 2.51. GPI's P/B has been as high as 2.19 and as low as 1.19, with a median of 1.75, over the past year.

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 popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GPI has a P/S ratio of 0.23. This compares to its industry's average P/S of 0.43.

Finally, our model also underscores that GPI has a P/CF ratio of 5.48. 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. GPI's current P/CF looks attractive when compared to its industry's average P/CF of 10.52. Over the past year, GPI's P/CF has been as high as 8.49 and as low as 4.68, with a median of 6.90.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Group 1 Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GPI feels like a great value stock at the moment.


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