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ADNT vs. RACE: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in Automotive - Original Equipment stocks are likely familiar with Adient (ADNT) and Ferrari (RACE). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.

Right now, Adient is sporting a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #4 (Sell). This means that ADNT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.

ADNT currently has a forward P/E ratio of 35.96, while RACE has a forward P/E of 38.70. We also note that ADNT has a PEG ratio of 1.10. 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. RACE currently has a PEG ratio of 3.36.

Another notable valuation metric for ADNT is its P/B ratio of 0.42. 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, RACE has a P/B of 17.16.

These metrics, and several others, help ADNT earn a Value grade of A, while RACE has been given a Value grade of F.

ADNT 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 ADNT is likely the superior value option right now.


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Adient PLC (ADNT) : Free Stock Analysis Report
 
Ferrari N.V. (RACE) : Free Stock Analysis Report
 
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