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Investors interested in Automotive - Original Equipment stocks are likely familiar with BorgWarner (BWA) and Modine (MOD). 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.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, BorgWarner has a Zacks Rank of #2 (Buy), while Modine has a Zacks Rank of #3 (Hold). This means that BWA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 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.
BWA currently has a forward P/E ratio of 8.01, while MOD has a forward P/E of 36.31. We also note that BWA has a PEG ratio of 0.75. 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. MOD currently has a PEG ratio of 1.07.
Another notable valuation metric for BWA is its P/B ratio of 1.17. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, MOD has a P/B of 8.41.
Based on these metrics and many more, BWA holds a Value grade of A, while MOD has a Value grade of C.
BWA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BWA is likely the superior value option right now.
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BorgWarner Inc. (BWA) : Free Stock Analysis Report
Modine Manufacturing Company (MOD) : Free Stock Analysis Report