Investors interested in stocks from the Automotive - Domestic sector have probably already heard of General Motors Company (GM) and Tesla (TSLA). But which of these two companies is the best option for those looking for undervalued stocks? 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.
General Motors Company and Tesla are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that GM likely has seen a stronger improvement to its earnings outlook than TSLA has recently. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
GM currently has a forward P/E ratio of 4.98, while TSLA has a forward P/E of 54. We also note that GM has a PEG ratio of 0.51. 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. TSLA currently has a PEG ratio of 2.19.
Another notable valuation metric for GM is its P/B ratio of 0.63. 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, TSLA has a P/B of 12.54.
These are just a few of the metrics contributing to GM's Value grade of A and TSLA's Value grade of D.
GM stands above TSLA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GM is the superior value option right now.
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