Investors looking for stocks in the Automotive – Domestic sector might want to consider either General Motors Company (GM) or Tesla (TSLA). But which of these two stocks is more attractive to value investors? We’ll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, General Motors Company has a Zacks Rank of #1 (Strong 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 GM has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
GM currently has a forward P/E ratio of 10.33, while TSLA has a forward P/E of 135.04. We also note that GM has a PEG ratio of 1.05. 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 3.60.
Another notable valuation metric for GM is its P/B ratio of 1.45. 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, TSLA has a P/B of 23.08.
These are just a few of the metrics contributing to GM’s Value grade of A and TSLA’s Value grade of F.
GM 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 GM is likely the superior value option right now.
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