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Investors interested in stocks from the Automotive - Retail and Whole Sales sector have probably already heard of Group 1 Automotive (GPI) and Rush Enterprises (RUSHA). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, Group 1 Automotive has a Zacks Rank of #2 (Buy), while Rush Enterprises has a Zacks Rank of #5 (Strong Sell). Investors should feel comfortable knowing that GPI likely has seen a stronger improvement to its earnings outlook than RUSHA has recently. But this is just one factor that value investors are interested in.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
GPI currently has a forward P/E ratio of 3.37, while RUSHA has a forward P/E of 11. We also note that GPI has a PEG ratio of 0.61. 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. RUSHA currently has a PEG ratio of 0.73.
Another notable valuation metric for GPI is its P/B ratio of 0.62. 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, RUSHA has a P/B of 0.90.
Based on these metrics and many more, GPI holds a Value grade of A, while RUSHA has a Value grade of C.
GPI 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 GPI is likely the superior value option right now.
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