Should Value Investors Buy Autoliv (ALV) 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.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

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 Autoliv (ALV). ALV is currently sporting a Zacks Rank #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 12.53. This compares to its industry's average Forward P/E of 19.36. Over the past year, ALV's Forward P/E has been as high as 12.73 and as low as 7.83, with a median of 9.96.

Another valuation metric that we should highlight is ALV's P/B ratio of 3.9. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 4.34. Over the past 12 months, ALV's P/B has been as high as 3.95 and as low as 2.51, with a median of 3.33.

Investors could also keep in mind BorgWarner (BWA), another Automotive - Original Equipment stock with a Zacks Rank of #2 (Buy) and Value grade of A.

BorgWarner is trading at a forward earnings multiple of 9.26 at the moment, with a PEG ratio of 1.39. This compares to its industry's average P/E of 19.36 and average PEG ratio of 1.00.

Over the past year, BWA's P/E has been as high as 9.34, as low as 5.66, with a median of 7.41; its PEG ratio has been as high as 1.67, as low as 0.59, with a median of 0.91 during the same time period.

BorgWarner also has a P/B ratio of 1.58 compared to its industry's price-to-book ratio of 4.34. Over the past year, its P/B ratio has been as high as 1.58, as low as 0.93, with a median of 1.21.

Value investors will likely look at more than just these metrics, but the above data helps show that Autoliv and BorgWarner are likely undervalued currently. And when considering the strength of its earnings outlook, ALV and BWA sticks out as one of the market's strongest value stocks.

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

Zacks Investment Research