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Should Value Investors Buy BorgWarner (BWA) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore 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 rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company value investors might notice is BorgWarner (BWA). BWA is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 10.54. This compares to its industry's average Forward P/E of 16.14. Over the last 12 months, BWA's Forward P/E has been as high as 15.62 and as low as 4.86, with a median of 10.82.

BWA is also sporting a PEG ratio of 1.08. 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. BWA's PEG compares to its industry's average PEG of 1.38. Over the past 52 weeks, BWA's PEG has been as high as 2.81 and as low as 0.69, with a median of 1.38.

Another notable valuation metric for BWA is its P/B ratio of 1.94. 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. BWA's current P/B looks attractive when compared to its industry's average P/B of 2.41. BWA's P/B has been as high as 2.07 and as low as 0.84, with a median of 1.63, over the past year.

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


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