Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Modine (MOD) or Gentherm (THRM). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Modine is sporting a Zacks Rank of #2 (Buy), while Gentherm has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that MOD likely has seen a stronger improvement to its earnings outlook than THRM has recently. 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
MOD currently has a forward P/E ratio of 3.54, while THRM has a forward P/E of 23.27. We also note that MOD has a PEG ratio of 0.35. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. THRM currently has a PEG ratio of 1.79.
Another notable valuation metric for MOD is its P/B ratio of 0.39. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, THRM has a P/B of 2.71.
Based on these metrics and many more, MOD holds a Value grade of A, while THRM has a Value grade of D.
MOD has seen stronger estimate revision activity and sports more attractive valuation metrics than THRM, so it seems like value investors will conclude that MOD is the superior option right now.
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Modine Manufacturing Company (MOD) : Free Stock Analysis Report
Gentherm Inc (THRM) : Free Stock Analysis Report
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