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LCII vs. RACE: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Qualcomm (QCOM) closed at $71.80 in the latest trading session, marking a -0.22% move from the prior day.

Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either LCI (LCII) or Ferrari (RACE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, LCI has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that LCII likely has seen a stronger improvement to its earnings outlook than RACE has recently. But this is only part of the picture for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

LCII currently has a forward P/E ratio of 15.32, while RACE has a forward P/E of 35.04. We also note that LCII has a PEG ratio of 0.96. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RACE currently has a PEG ratio of 2.02.

Another notable valuation metric for LCII is its P/B ratio of 3.09. 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. By comparison, RACE has a P/B of 16.14.

These metrics, and several others, help LCII earn a Value grade of B, while RACE has been given a Value grade of D.

LCII is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that LCII is likely the superior value option right now.


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