Which stocks should value investors buy now?

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 offers investors the better value opportunity right now? Let’s take a closer look.

The best way to find stocks that offer good value is to combine a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores evaluate companies based on specific traits.

Currently, Magna has a Zacks Rank of #2 (Buy), while Spartan Motors has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive earnings estimate revisions, so investors can take comfort in knowing that MGA has an improving earnings outlook. However, value investors will be interested in much more than just this.

Value investors also try to analyze a wide range of traditional numbers and metrics to determine whether a company is undervalued at its current share price level.

Our Value category evaluates stocks using a number of key metrics, including the tried-and-true P/E, P/S, earnings yield and cash flow per share, as well as a number of other fundamental metrics commonly used by value investors.

MGA currently has a forward P/E ratio of 8.68, while SPAR has a forward P/E ratio of 22.76. We also note that MGA has a PEG ratio of 1.02. This metric is used similarly to the well-known P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. SPAR currently has a PEG ratio of 1.52.

Another important valuation metric for MGA is its P/B ratio of 1.78. The P/B ratio is used to compare the market value of a stock to its book value, which is defined as total assets minus total liabilities. For comparison, SPAR has a P/B ratio of 2.92.

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

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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