While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system’s “Value” category. Stocks with both “A” grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
Group 1 Automotive (GPI) is a stock many investors are watching right now. GPI is currently holding a Zacks Rank of #1 (Strong Buy) and a Value grade of A. The stock is trading with a P/E ratio of 9.24, which compares to its industry’s average of 11.60. Over the past year, GPI’s Forward P/E has been as high as 9.75 and as low as 2.64, with a median of 8.15.
Another notable valuation metric for GPI is its P/B ratio of 1.33. 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. GPI’s current P/B looks attractive when compared to its industry’s average P/B of 1.50. GPI’s P/B has been as high as 1.71 and as low as 0.48, with a median of 1.30, over the past year.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock’s price with the company’s revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GPI has a P/S ratio of 0.15. This compares to its industry’s average P/S of 0.28.
Finally, investors will want to recognize that GPI has a P/CF ratio of 7.39. This metric focuses on a firm’s operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This company’s current P/CF looks solid when compared to its industry’s average P/CF of 11.41. GPI’s P/CF has been as high as 8.58 and as low as 2.44, with a median of 6.61, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Group 1 Automotive is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, GPI feels like a great value stock at the moment.
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Group 1 Automotive, Inc. (GPI) : Free Stock Analysis Report
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