Investors looking for stocks in the Automotive – Original Equipment sector might want to consider either Strattec Security (STRT) or Ferrari $RACE (RACE). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Strattec Security and Ferrari are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that STRT likely has seen a stronger improvement to its earnings outlook than RACE has recently. 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.
STRT currently has a forward P/E ratio of 12.20, while RACE has a forward P/E of 29.48. We also note that STRT has a PEG ratio of 1.22. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. RACE currently has a PEG ratio of 3.16.
Another notable valuation metric for STRT is its P/B ratio of 1.21. 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, RACE has a P/B of 17.67.
These are just a few of the metrics contributing to STRT’s Value grade of A and RACE’s Value grade of D.
STRT sticks out from RACE in both our Zacks Rank and Style Scores models, so value investors will likely feel that STRT is the better option right now.
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