Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of China Yuchai (CYD) and Modine (MOD). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
China Yuchai and Modine are both sporting a Zacks Rank of #1 (Strong Buy) right now. 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 also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
CYD currently has a forward P/E ratio of 13.85, while MOD has a forward P/E of 40.68. We also note that CYD has a PEG ratio of 0.24. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. MOD currently has a PEG ratio of 1.20.
Another notable valuation metric for CYD is its P/B ratio of 0.89. 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 9.15.
Based on these metrics and many more, CYD holds a Value grade of A, while MOD has a Value grade of D.
Both CYD and MOD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CYD is the superior value 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).