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 is more attractive to value investors? We’ll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
BorgWarner has a Zacks Rank of #2 (Buy), while Gentex has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that BWA likely has seen a stronger improvement to its earnings outlook than GNTX has recently. However, value investors will care about much more than just this.
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 8.05, while GNTX has a forward P/E of 15.89. We also note that BWA has a PEG ratio of 0.79. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company’s expected earnings growth rate. GNTX currently has a PEG ratio of 0.94.
Another notable valuation metric for BWA is its P/B ratio of 1.23. 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, GNTX has a P/B of 3.26.
Based on these metrics and many more, BWA holds a Value grade of A, while GNTX has a Value grade of C.
BWA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BWA is likely the superior value option right now.
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BorgWarner Inc. (BWA) : Free Stock Analysis Report
Gentex Corporation (GNTX) : Free Stock Analysis Report