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BWA vs. GNTX: Which Stock Is the Better Value Option?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either BorgWarner (BWA) or Gentex (GNTX). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

BorgWarner has a Zacks Rank of #2 (Buy), while Gentex has a Zacks Rank of #5 (Strong Sell) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BWA is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

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Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

BWA currently has a forward P/E ratio of 8.96, while GNTX has a forward P/E of 18.44. We also note that BWA has a PEG ratio of 0.29. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. GNTX currently has a PEG ratio of 1.54.

Another notable valuation metric for BWA is its P/B ratio of 1.26. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, GNTX has a P/B of 3.24.

Based on these metrics and many more, BWA holds a Value grade of A, while GNTX has a Value grade of D.

BWA 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 BWA is likely the superior value option right now.


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BorgWarner Inc. (BWA) : Free Stock Analysis Report
 
Gentex Corporation (GNTX) : Free Stock Analysis Report
 
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Zacks Investment Research