Investors with an interest in Automotive – Domestic stocks have likely encountered both Paccar (PCAR) and Tesla (TSLA). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, Paccar 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 PCAR has an improving earnings outlook. 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.
PCAR currently has a forward P/E ratio of 11.26, while TSLA has a forward P/E of 67.76. We also note that PCAR has a PEG ratio of 1.13. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. TSLA currently has a PEG ratio of 2.26.
Another notable valuation metric for PCAR is its P/B ratio of 2.32. 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, TSLA has a P/B of 22.30.
These are just a few of the metrics contributing to PCAR’s Value grade of A and TSLA’s Value grade of D.
PCAR has seen stronger estimate revision activity and sports more attractive valuation metrics than TSLA, so it seems like value investors will conclude that PCAR is the superior option right now.
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