PCAR vs. TSLA: Which Stock Should Value Investors Buy Now?

Investors with an interest in Automotive - Domestic stocks have likely encountered both Paccar (PCAR) and Tesla (TSLA). 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Paccar has a Zacks Rank of #2 (Buy), while Tesla has a Zacks Rank of #4 (Sell) right now. This means that PCAR's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

PCAR currently has a forward P/E ratio of 23.14, while TSLA has a forward P/E of 171.52. We also note that PCAR has a PEG ratio of 1.07. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. TSLA currently has a PEG ratio of 7.59.

Another notable valuation metric for PCAR is its P/B ratio of 3.46. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TSLA has a P/B of 13.95.

These metrics, and several others, help PCAR earn a Value grade of B, while TSLA has been given a Value grade of F.

PCAR is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PCAR is likely the superior value option right now.

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

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