Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Magna (MGA) or Gentex (GNTX). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both Magna and Gentex are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
MGA currently has a forward P/E ratio of 8.25, while GNTX has a forward P/E of 17.57. We also note that MGA has a PEG ratio of 1.38. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. GNTX currently has a PEG ratio of 3.50.
Another notable valuation metric for MGA is its P/B ratio of 1.50. 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, GNTX has a P/B of 4.05.
These metrics, and several others, help MGA earn a Value grade of A, while GNTX has been given a Value grade of D.
Both MGA and GNTX are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MGA is the superior value option right now.
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Magna International Inc. (MGA) : Free Stock Analysis Report
Gentex Corporation (GNTX) : Free Stock Analysis Report
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