Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Fiat Chrysler Automobiles N.V. stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Fiat Chrysler has a trailing twelve months PE ratio of 7.24.



This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.93. While Fiat Chrysler’s current PE level puts it above its midpoint of 6.31 over the past two years, the current level stands well below the highs for this stock, suggesting it might be a good entry point.



Further, the stock’s PE also compares favorably with the Zacks classified Auto- Tires- Trucks sector’s trailing twelve months PE ratio, which stands at 10.96. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.



We should also point out that Fiat Chrysler has a forward PE ratio (price relative to this year’s earnings) of just 5.83, so it is fair to say that a slightly more value-oriented path may be ahead for Fiat Chrysler stock in the near term too.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Fiat Chrysler has a P/S ratio of about 0.13. This is significantly lower than the S&P 500 average, which comes in at 2.98 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past couple of years. If anything, this suggests some level of undervalued trading for FCAU—at least compared to historical norms.



Broad Value Outlook

In aggregate, Fiat Chrysler currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Fiat Chrysler a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Fiat Chrysler is just 0.27, a level that is far lower than the industry average of 0.96. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 1.73, which is far better than the industry average of 5.55. Clearly, FCAU is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Fiat Chrysler might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives FCAU a Zacks VGM score—or its overarching fundamental grade—of ‘A’. (You can read more about the Zacks Style Scores here >>)

However, the company’s recent earnings estimates have been disappointing, as both the current quarter and full year estimates have seen no upward revisions, with two downward revisions each, over the past sixty days.

This has had a negative impact on the consensus estimate, as the current quarter consensus estimate has tumbled 14.9% in the past two months, while the full year estimate has declined by 6.2%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Nonetheless, the stock has a long term expected earnings growth of 21.7% and carries a Zacks Rank #3 (Hold). These mixed expectations indicate that while the stock’s growth story might be good over the long term, analysts have some apprehensions about the stock in the immediate future. Thus, we are looking for in-line performance from the company in the near term.

Bottom Line

Fiat Chrysler is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite having a Zacks Rank #3, the stock belongs to an industry which is ranked among the Top 30%, which indicates that broader factors are favorable for the company. However, over the past two years, the Zacks categorized Auto Manufacturers – Foreign industry has underperformed the broader market, as you can see below:



So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

Zacks' Top Investment Ideas for Long-Term Profit

How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>