ALSN or RACE: Which Is the Better Value Stock Right Now?
Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Allison Transmission (ALSN) and Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Allison Transmission has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALSN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ALSN currently has a forward P/E ratio of 11.44, while RACE has a forward P/E of 39.22. We also note that ALSN has a PEG ratio of 1.63. 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 1.90.
Another notable valuation metric for ALSN is its P/B ratio of 6.54. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, RACE has a P/B of 15.62.
These are just a few of the metrics contributing to ALSN's Value grade of A and RACE's Value grade of D.
ALSN sticks out from RACE in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALSN is the better option right now.
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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
Ferrari N.V. (RACE) : Free Stock Analysis Report
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