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Is Sonic Automotive (SAH) Stock Undervalued 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.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Sonic Automotive (SAH) is a stock many investors are watching right now. SAH is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.

Another notable valuation metric for SAH is its P/B ratio of 1.44. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.74. Over the past 12 months, SAH's P/B has been as high as 1.59 and as low as 0.70, with a median of 0.95.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. SAH has a P/S ratio of 0.13. This compares to its industry's average P/S of 0.26.

Finally, investors should note that SAH has a P/CF ratio of 6.32. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 7.88. Over the past 52 weeks, SAH's P/CF has been as high as 6.99 and as low as 3, with a median of 4.44.

These are only a few of the key metrics included in Sonic Automotive's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SAH looks like an impressive value stock at the moment.


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