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Is Sonic Automotive (SAH) a Great Value Stock Right Now?

Zacks Equity Research

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One stock to keep an eye on is Sonic Automotive (SAH). SAH is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 10.34 right now. For comparison, its industry sports an average P/E of 10.40. Over the last 12 months, SAH's Forward P/E has been as high as 13.51 and as low as 6.57, with a median of 10.85.

Investors should also recognize that SAH has a P/B ratio of 1.46. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.84. SAH's P/B has been as high as 1.65 and as low as 0.70, with a median of 1.15, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. SAH has a P/S ratio of 0.13. This compares to its industry's average P/S of 0.28.

Finally, our model also underscores that SAH has a P/CF ratio of 6.34. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.63. Over the past 52 weeks, SAH's P/CF has been as high as 7.17 and as low as 3, with a median of 5.09.

Value investors will likely look at more than just these metrics, but the above data helps show that Sonic Automotive is likely undervalued currently. And when considering the strength of its earnings outlook, SAH sticks out at as one of the market's strongest value stocks.


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