Is Honda Motor Co. (HMC) Stock Undervalued Right Now?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Honda Motor Co. (HMC). HMC is currently holding a Zacks Rank #2 (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 10.69. 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. 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. This stock's P/B looks solid versus its industry's average P/B of 1.11. Over the past 12 months, 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 love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. 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 0.33. This compares to its industry's average P/S of 0.43.

Finally, investors will want to 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. HMC's current P/CF looks attractive when compared to its industry's average P/CF of 7.10. Within the past 12 months, HMC's P/CF has been as high as 5.31 and as low as 3.12, with a median of 4.11.

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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