Which stock offers the better value option?

Investors looking for stocks in the automotive original equipment sector should consider either Magna (MGA) or Spartan Motors (SPAR). But which of these two stocks currently offers value investors the better value for money? We need to take a closer look.

The best way to find good value stocks is to combine a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank places an emphasis on earnings estimates and estimate revisions, while our Style Scores aim to identify stocks with specific traits.

Magna currently has a Zacks Rank of #2 (Buy), while Spartan Motors has a Zacks Rank of #3 (Hold). Investors should take comfort in the fact that MGA’s earnings outlook has likely improved more than SPAR has recently. But that’s just one factor that value investors care about.

Value investors are also interested in a number of proven valuation metrics that show when a company is undervalued at its current share price level.

The Value category of the Style Scores system identifies undervalued companies using a number of key metrics, including the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other fundamentals that help us determine a company’s fair value.

MGA currently has a forward P/E ratio of 8.50, while SPAR has a forward P/E ratio of 23.78. We also note that MGA has a PEG ratio of 1. This popular number is similar to the widely used P/E ratio, but the PEG ratio also takes into account a company’s expected EPS growth rate. SPAR currently has a PEG ratio of 1.59.

Another important valuation metric for MGA is its P/B ratio of 1.74. The P/B ratio compares a stock’s market value to its book value, which is defined as total assets minus total liabilities. For comparison, SPAR has a P/B ratio of 3.05.

These and some other key figures help MGA to achieve a rating of A, while SPAR receives a rating of D.

MGA has seen more estimate revision activity and has more attractive valuation multiples than SPAR, so value investors seem to be concluding that MGA is the better option at present.

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Magna International Inc. (MGA): Free Stock Analysis Report

Spartan Motors, Inc. (SPAR): Free Stock Analysis Report

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