Should Value Investors Buy Honda Motor Co. (HMC) Stock?

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is Honda Motor Co. (HMC). HMC is currently holding a Zacks Rank #1 (Strong Buy) and a Value grade of A. The stock is trading with P/E ratio of 9.87 right now. For comparison, its industry sports an average P/E of 10.48. Over the last 12 months, HMC's Forward P/E has been as high as 10.44 and as low as 5.17, with a median of 6.92.

Another notable valuation metric for HMC is its P/B ratio of 0.63. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.11. Over the past year, HMC's P/B has been as high as 0.66 and as low as 0.44, with a median of 0.55.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. HMC has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.41.

Finally, we should also recognize that HMC has a P/CF ratio of 5.08. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 7.12. HMC's P/CF has been as high as 5.31 and as low as 3.12, with a median of 4.11, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Honda Motor Co. is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, HMC feels like a great value stock at the moment.

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This article originally published on Zacks Investment Research (zacks.com).

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