Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of China Yuchai (CYD) and Mobileye Global (MBLY). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
China Yuchai and Mobileye Global are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This means that CYD's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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.
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 15.19, while MBLY has a forward P/E of 34.08. We also note that CYD has a PEG ratio of 0.43. 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. MBLY currently has a PEG ratio of 1.83.
Another notable valuation metric for CYD is its P/B ratio of 0.94. 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, MBLY has a P/B of 0.98.
Based on these metrics and many more, CYD holds a Value grade of A, while MBLY has a Value grade of D.
CYD has seen stronger estimate revision activity and sports more attractive valuation metrics than MBLY, so it seems like value investors will conclude that CYD is the superior option right now.
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China Yuchai International Limited (CYD): Free Stock Analysis Report
Mobileye Global Inc. (MBLY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).