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.
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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.
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 to watch right now is Continental (CTTAY). CTTAY is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock has a Forward P/E ratio of 7.69. This compares to its industry’s average Forward P/E of 20.25. Over the past 52 weeks, CTTAY’s Forward P/E has been as high as 12.07 and as low as 6.94, with a median of 8.78.
Investors should also recognize that CTTAY has a P/B ratio of 1. 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. CTTAY’s current P/B looks attractive when compared to its industry’s average P/B of 2.69. CTTAY’s P/B has been as high as 1.14 and as low as 0.78, with a median of 0.98, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock’s price with the company’s revenue. This is a prefered metric because revenue can’t really be manipulated, so sales are often a truer performance indicator. CTTAY has a P/S ratio of 0.37. This compares to its industry’s average P/S of 0.86.
Another great Automotive – Original Equipment stock you could consider is Gentherm (THRM), which is a # 2 (Buy) stock with a Value Score of A.
Gentherm sports a P/B ratio of 2.83 as well; this compares to its industry’s price-to-book ratio of 2.69. In the past 52 weeks, THRM’s P/B has been as high as 3.29, as low as 1.95, with a median of 2.75.
These are only a few of the key metrics included in Continental and Gentherm strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, CTTAY and THRM look like an impressive value stock at the moment.
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Continental AG (CTTAY) : Free Stock Analysis Report
Gentherm Inc (THRM) : Free Stock Analysis Report