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Is Meritor (MTOR) Stock Undervalued Right Now?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

Meritor (MTOR) is a stock many investors are watching right now. MTOR is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 5.19. This compares to its industry's average Forward P/E of 10.75. MTOR's Forward P/E has been as high as 7.71 and as low as 4.75, with a median of 6.37, all within the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MTOR has a P/S ratio of 0.33. This compares to its industry's average P/S of 0.39.

Finally, our model also underscores that MTOR has a P/CF ratio of 4.09. 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. MTOR's P/CF compares to its industry's average P/CF of 6.13. MTOR's P/CF has been as high as 8.91 and as low as 4.09, with a median of 5.59, all within the past year.

These are only a few of the key metrics included in Meritor'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, MTOR looks like an impressive value stock at the moment.


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