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Investors interested in stocks from the Automotive - Replacement Parts sector have probably already heard of SPX (SPXC) and Genuine Parts (GPC). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
SPX has a Zacks Rank of #2 (Buy), while Genuine Parts has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that SPXC likely has seen a stronger improvement to its earnings outlook than GPC has recently. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
SPXC currently has a forward P/E ratio of 9.52, while GPC has a forward P/E of 11.40. We also note that SPXC has a PEG ratio of 0.95. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GPC currently has a PEG ratio of 2.89.
Another notable valuation metric for SPXC is its P/B ratio of 2.50. 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, GPC has a P/B of 2.61.
These metrics, and several others, help SPXC earn a Value grade of B, while GPC has been given a Value grade of C.
SPXC has seen stronger estimate revision activity and sports more attractive valuation metrics than GPC, so it seems like value investors will conclude that SPXC is the superior option right now.
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