Investors looking for stocks in the Automotive – Replacement Parts sector might want to consider either Standard Motor Products (SMP) or CarGurus (CARG). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Currently, both Standard Motor Products and CarGurus are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SMP currently has a forward P/E ratio of 18.06, while CARG has a forward P/E of 117.46. We also note that SMP has a PEG ratio of 3.01. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company’s expected earnings growth rate. CARG currently has a PEG ratio of 23.49.
Another notable valuation metric for SMP is its P/B ratio of 2.26. 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, CARG has a P/B of 21.47.
Based on these metrics and many more, SMP holds a Value grade of B, while CARG has a Value grade of F.
Both SMP and CARG are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SMP is the superior value option right now.
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