Investors with an interest in Automotive - Domestic stocks have likely encountered both Paccar (PCAR) and Fox Factory Holding (FOXF). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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.
Both Paccar and Fox Factory Holding have a Zacks Rank of # 2 (Buy) right now. 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 just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
PCAR currently has a forward P/E ratio of 10.42, while FOXF has a forward P/E of 28. We also note that PCAR has a PEG ratio of 1.24. 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. FOXF currently has a PEG ratio of 1.71.
Another notable valuation metric for PCAR is its P/B ratio of 2.67. 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, FOXF has a P/B of 8.19.
Based on these metrics and many more, PCAR holds a Value grade of A, while FOXF has a Value grade of D.
Both PCAR and FOXF are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PCAR is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PACCAR Inc. (PCAR) : Free Stock Analysis Report
Fox Factory Holding Corp. (FOXF) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research