Investors looking for stocks in the Automotive – Original Equipment sector might want to consider either BorgWarner (BWA) or Gentex (GNTX). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
BorgWarner has a Zacks Rank of #2 (Buy), while Gentex has a Zacks Rank of #3 (Hold) right now. This means that BWA’s earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
BWA currently has a forward P/E ratio of 8.43, while GNTX has a forward P/E of 16.16. We also note that BWA has a PEG ratio of 0.82. 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. GNTX currently has a PEG ratio of 0.96.
Another notable valuation metric for BWA is its P/B ratio of 1.29. The P/B is a method of comparing a stock’s market value to its book value, which is defined as total assets minus total liabilities. By comparison, GNTX has a P/B of 3.32.
These are just a few of the metrics contributing to BWA’s Value grade of A and GNTX’s Value grade of C.
BWA stands above GNTX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BWA is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
BorgWarner Inc. (BWA) : Free Stock Analysis Report
Gentex Corporation (GNTX) : Free Stock Analysis Report