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Is Lithia Motors (LAD) Stock Undervalued Right Now?

Zacks Equity Research

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.

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is Lithia Motors (LAD). LAD is currently sporting a Zacks Rank of #1 (Strong Buy), as well as an A grade for Value. The stock holds a P/E ratio of 10.90, while its industry has an average P/E of 11.27. Over the past 52 weeks, LAD's Forward P/E has been as high as 12.57 and as low as 7.10, with a median of 10.34.

Investors should also note that LAD holds a PEG ratio of 1.13. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LAD's industry currently sports an average PEG of 1.84. Within the past year, LAD's PEG has been as high as 1.53 and as low as 0.57, with a median of 1.11.

Value investors will likely look at more than just these metrics, but the above data helps show that Lithia Motors is likely undervalued currently. And when considering the strength of its earnings outlook, LAD sticks out at as one of the market's strongest value stocks.


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