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Should Value Investors Buy China Automotive Systems (CAAS) Stock?

Zacks Equity Research

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

China Automotive Systems (CAAS) is a stock many investors are watching right now. CAAS is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock has a Forward P/E ratio of 10.60. This compares to its industry's average Forward P/E of 13.27. Over the past 52 weeks, CAAS's Forward P/E has been as high as 13.07 and as low as 3.53, with a median of 7.29.

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. CAAS has a P/S ratio of 0.22. This compares to its industry's average P/S of 0.44.

Finally, investors should note that CAAS has a P/CF ratio of 4.69. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 7.74. CAAS's P/CF has been as high as 6.89 and as low as -6.21, with a median of 4.39, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that China Automotive Systems is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, CAAS feels like a great value stock at the moment.


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