Should value investors buy AutoNation (AN) shares?

Here at Zacks, we focus on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions, to find great stocks, but we always pay attention to the latest value, growth and momentum trends to highlight strong picks.

Of these, perhaps no stock market trend is more popular than value investing, a strategy that has proven successful in all kinds of market environments. Value investors use tried-and-tested metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors can also use our innovative Style Scores system to find stocks with specific traits. For example, value investors should focus on the Value category. Stocks with high Zacks Ranks and “A” grades for Value are among the highest-quality value stocks on the market today.

One stock to watch is AutoNation (AN). AN currently has a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 11.65. This compares to the industry’s average Forward P/E of 13.72. Over the past year, AN’s Forward P/E has ranged from 14.25 to 4.56, with a median of 10.17.

AN also has a PEG ratio of 1.04. This popular number is similar to the widely used P/E ratio, but it also takes into account a company’s expected EPS growth rate. AN’s industry currently has an average PEG of 2.32. AN’s PEG has been as high as 4.19 and 0.90 over the past year, with a median of 1.28.

Value investors also often use the P/S ratio. This metric is calculated by dividing the stock price by the company’s revenue. This is a popular metric because revenue is harder to manipulate on an income statement and is therefore often considered a better indicator of performance. AN has a P/S ratio of 0.36. In comparison, the average P/S ratio in its industry is 0.5.

Finally, we should also consider that AN has a P/CF ratio of 8.53. This metric considers a company’s operating cash flow and can be used to find stocks that are undervalued due to their solid cash outlook. This stock’s P/CF looks attractive when compared to the industry average of 11.41. Over the past 12 months, AN’s P/CF has ranged from 8.73 to 3.22, with a median of 5.94.

These are just some of the numbers that went into AutoNation’s great value rating. Still, they show that the stock is likely undervalued right now. Add this to the strong earnings outlook, and it’s clear that AN is an impressive value stock right now.

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