VLVLY or RACE: Which Is the Better Value Stock Right Now?

Investors interested in Automotive - Original Equipment stocks are likely familiar with AB Volvo (VLVLY) and Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, AB Volvo has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that VLVLY likely has seen a stronger improvement to its earnings outlook than RACE has recently. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

VLVLY currently has a forward P/E ratio of 14.60, while RACE has a forward P/E of 30.89. We also note that VLVLY has a PEG ratio of 0.75. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. RACE currently has a PEG ratio of 3.31.

Another notable valuation metric for VLVLY is its P/B ratio of 3.31. 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. By comparison, RACE has a P/B of 17.22.

These metrics, and several others, help VLVLY earn a Value grade of A, while RACE has been given a Value grade of D.

VLVLY has seen stronger estimate revision activity and sports more attractive valuation metrics than RACE, so it seems like value investors will conclude that VLVLY is the superior option right now.

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

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