Should Value Investors Buy BorgWarner (BWA) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system’s “Value” category. Stocks with both “A” grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is BorgWarner (BWA). BWA is currently sporting a Zacks Rank #1 (Strong Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 9.32 right now. For comparison, its industry sports an average P/E of 21.41. Over the past year, BWA’s Forward P/E has been as high as 9.34 and as low as 5.66, with a median of 7.37.

Investors should also note that BWA holds a PEG ratio of 1.28. 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. BWA’s industry currently sports an average PEG of 1.36. Over the past 52 weeks, BWA’s PEG has been as high as 1.67 and as low as 0.59, with a median of 0.89.

We should also highlight that BWA has a P/B ratio of 1.58. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. This stock’s P/B looks attractive against its industry’s average P/B of 3.60. BWA’s P/B has been as high as 1.58 and as low as 0.93, with a median of 1.20, over the past year.

Value investors also use the P/S ratio. The P/S ratio is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BWA has a P/S ratio of 0.67. This compares to its industry’s average P/S of 0.73.

Another great Automotive – Original Equipment stock you could consider is Gentex (GNTX), which is a Zacks Rank of #2 (Buy) stock with a Value Score of A.

Gentex is currently trading with a Forward P/E ratio of 14.58 while its PEG ratio sits at 1.07. Both of the company’s metrics compare favorably to its industry’s average P/E of 21.41 and average PEG ratio of 1.36.