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ALSN vs. RACE: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Allison Transmission (ALSN) or Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 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.

Currently, Allison Transmission has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). This means that ALSN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

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Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

ALSN currently has a forward P/E ratio of 8.67, while RACE has a forward P/E of 46.01. We also note that ALSN has a PEG ratio of 1.24. 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. RACE currently has a PEG ratio of 3.03.

Another notable valuation metric for ALSN is its P/B ratio of 5.10. 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, RACE has a P/B of 17.43.

These metrics, and several others, help ALSN earn a Value grade of A, while RACE has been given a Value grade of D.

ALSN stands above RACE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ALSN is the superior value option right now.


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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
 
Ferrari N.V. (RACE) : Free Stock Analysis Report
 
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Zacks Investment Research