Investors looking for stocks in the Automotive – Domestic sector might want to consider either Harley-Davidson (HOG) or Tesla (TSLA). But which of these two companies is the best option for those looking for undervalued stocks? Let’s take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Harley-Davidson and Tesla have a Zacks Rank of # 1 (Strong Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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.
HOG currently has a forward P/E ratio of 10.17, while TSLA has a forward P/E of 191.49. We also note that HOG has a PEG ratio of 0.22. 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 5.11.
Another notable valuation metric for HOG is its P/B ratio of 2.41. 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 41.22.
Based on these metrics and many more, HOG holds a Value grade of A, while TSLA has a Value grade of F.
Both HOG and TSLA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HOG is the superior value option right now.
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