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Investors with an interest in Automotive - Domestic stocks have likely encountered both Polaris Inc (PII) and Tesla (NASDAQ:TSLA). 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.
Right now, Polaris Inc is sporting a Zacks Rank of #2 (Buy), while Tesla has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that PII has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
PII currently has a forward P/E ratio of 12.14, while TSLA has a forward P/E of 92.29. We also note that PII has a PEG ratio of 1.01. 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. TSLA currently has a PEG ratio of 2.32.
Another notable valuation metric for PII is its P/B ratio of 4.66. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, TSLA has a P/B of 18.
Based on these metrics and many more, PII holds a Value grade of B, while TSLA has a Value grade of F.
PII sticks out from TSLA in both our Zacks Rank and Style Scores models, so value investors will likely feel that PII is the better option right now.
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