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

Zacks Equity Research

Investors with an interest in Automotive - Original Equipment stocks have likely encountered both Allison Transmission (ALSN) and Ferrari (RACE). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.

Allison Transmission and Ferrari are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALSN is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

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.

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The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

ALSN currently has a forward P/E ratio of 9.58, while RACE has a forward P/E of 36.46. We also note that ALSN has a PEG ratio of 1.37. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. RACE currently has a PEG ratio of 2.22.

Another notable valuation metric for ALSN is its P/B ratio of 8.38. 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, RACE has a P/B of 18.41.

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

ALSN has seen stronger estimate revision activity and sports more attractive valuation metrics than RACE, so it seems like value investors will conclude that ALSN is the superior option right now.


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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report
 
Ferrari N.V. (RACE) : Free Stock Analysis Report
 
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