Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Modine (MOD) and Ferrari (RACE). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Modine has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #5 (Strong Sell) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MOD has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
MOD currently has a forward P/E ratio of 10.06, while RACE has a forward P/E of 41.72. We also note that MOD has a PEG ratio of 1.01. 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. RACE currently has a PEG ratio of 2.40.
Another notable valuation metric for MOD is its P/B ratio of 2.35. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, RACE has a P/B of 16.06.
These metrics, and several others, help MOD earn a Value grade of A, while RACE has been given a Value grade of D.
MOD 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 MOD is likely the superior value option right now.
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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
Ferrari N.V. (RACE) : Free Stock Analysis Report
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