Investors with an interest in Automotive – Original Equipment stocks have likely encountered both Wabco Holdings (WBC) and Visteon (VC). 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.
Currently, Wabco Holdings has a Zacks Rank of #2 (Buy), while Visteon has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that WBC has an improving earnings outlook. 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.
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.
WBC currently has a forward P/E ratio of 16.26, while VC has a forward P/E of 18.84. We also note that WBC has a PEG ratio of 1.08. 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. VC currently has a PEG ratio of 1.26.
Another notable valuation metric for WBC is its P/B ratio of 5.16. 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, VC has a P/B of 6.36.
These are just a few of the metrics contributing to WBC's Value grade of B and VC's Value grade of C.
WBC stands above VC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that WBC is the superior value option right now.
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Wabco Holdings Inc. (WBC): Free Stock Analysis Report
Visteon Corporation (VC): Free Stock Analysis Report
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