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ALSN vs. RACE: Which Stock Should Value Investors Buy 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 is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Allison Transmission has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold) right now. 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. However, value investors will care about much more than just this.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

ALSN currently has a forward P/E ratio of 11.06, while RACE has a forward P/E of 51.17. We also note that ALSN has a PEG ratio of 1.56. 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 4.97.

Another notable valuation metric for ALSN is its P/B ratio of 5.12. 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, RACE has a P/B of 28.41.

These metrics, and several others, help ALSN earn a Value grade of B, while RACE has been given a Value grade of C.

ALSN sticks out from RACE in both our Zacks Rank and Style Scores models, so value investors will likely feel that ALSN is the better option right now.


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

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

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