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

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Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Allison Transmission (ALSN - Free Report) and Ferrari (RACE - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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 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.

Right now, Allison Transmission is sporting a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALSN is likely seeing its earnings outlook improve to a greater extent. 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 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.

ALSN currently has a forward P/E ratio of 10.86, while RACE has a forward P/E of 52.33. We also note that ALSN has a PEG ratio of 1.53. 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. RACE currently has a PEG ratio of 5.20.

Another notable valuation metric for ALSN is its P/B ratio of 5.42. 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, RACE has a P/B of 28.92.

These are just a few of the metrics contributing to ALSN's Value grade of B and RACE's Value grade of C.

ALSN stands above RACE thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ALSN is the superior value option right now.


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Allison Transmission Holdings, Inc. (ALSN) - free report >>

Ferrari N.V. (RACE) - free report >>

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