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Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Dana (DAN) and Gentex (GNTX). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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.
Dana and Gentex are sporting Zacks Ranks of #1 (Strong Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DAN is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.
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.
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.
DAN currently has a forward P/E ratio of 8.69, while GNTX has a forward P/E of 13.04. We also note that DAN has a PEG ratio of 0.45. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GNTX currently has a PEG ratio of 0.92.
Another notable valuation metric for DAN is its P/B ratio of 1.44. 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, GNTX has a P/B of 2.28.
Based on these metrics and many more, DAN holds a Value grade of A, while GNTX has a Value grade of C.
DAN stands above GNTX thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DAN is the superior value option right now.
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Dana Incorporated (DAN) : Free Stock Analysis Report
Gentex Corporation (GNTX) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).