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Are Investors Undervaluing KAR Auction Services (KAR) Right Now?

Zacks Equity Research
·2 min read

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

KAR Auction Services (KAR) is a stock many investors are watching right now. KAR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 13.27. This compares to its industry's average Forward P/E of 19.47. Over the past 52 weeks, KAR's Forward P/E has been as high as 23.69 and as low as 7.34, with a median of 15.30.

We also note that KAR holds a PEG ratio of 2.15. 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. KAR's industry has an average PEG of 2.72 right now. Over the past 52 weeks, KAR's PEG has been as high as 4.28 and as low as 0.60, with a median of 1.48.

Finally, investors will want to recognize that KAR has a P/CF ratio of 9.09. 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. KAR's P/CF compares to its industry's average P/CF of 14.79. KAR's P/CF has been as high as 10.51 and as low as 3.41, with a median of 6.93, all within the past year.

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


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Zacks Investment Research