Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Visteon (VC) and Atmus Filtration Technologies (ATMU). But which of these two stocks presents investors with the better value opportunity right now? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both Visteon and Atmus Filtration Technologies are sporting a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.
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.
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.
VC currently has a forward P/E ratio of 11.99, while ATMU has a forward P/E of 17.53. We also note that VC has a PEG ratio of 0.78. 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. ATMU currently has a PEG ratio of 2.22.
Another notable valuation metric for VC is its P/B ratio of 1.69. 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, ATMU has a P/B of 10.54.
These metrics, and several others, help VC earn a Value grade of A, while ATMU has been given a Value grade of C.
Both VC and ATMU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that VC is the superior value option right now.
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Visteon Corporation (VC): Free Stock Analysis Report
Atmus Filtration Technologies Inc. (ATMU): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).