Investors with an interest in Automotive - Domestic stocks have likely encountered both Paccar (PCAR) and Tesla (TSLA). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.
Paccar and Tesla are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
PCAR currently has a forward P/E ratio of 13.97, while TSLA has a forward P/E of 81.21. We also note that PCAR has a PEG ratio of 2. 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. TSLA currently has a PEG ratio of 2.32.
Another notable valuation metric for PCAR is its P/B ratio of 2.72. 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, TSLA has a P/B of 12.61.
Based on these metrics and many more, PCAR holds a Value grade of B, while TSLA has a Value grade of F.
Both PCAR and TSLA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PCAR is the superior value option right now.