Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either China Yuchai (CYD) or Modine (MOD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
China Yuchai has a Zacks Rank of #1 (Strong Buy), while Modine has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CYD has an improving earnings outlook. However, value investors will care about much more than just this.
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.
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.
CYD currently has a forward P/E ratio of 18.88, while MOD has a forward P/E of 38.97. We also note that CYD has a PEG ratio of 0.54. 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. MOD currently has a PEG ratio of 0.97.
Another notable valuation metric for CYD is its P/B ratio of 1.17. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MOD has a P/B of 13.2.
These are just a few of the metrics contributing to CYD's Value grade of A and MOD's Value grade of D.
CYD sticks out from MOD in both our Zacks Rank and Style Scores models, so value investors will likely feel that CYD is the better option right now.
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China Yuchai International Limited (CYD): Free Stock Analysis Report
Modine Manufacturing Company (MOD): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).