ATMU or RACE: Which Is the Better Value Stock Right Now?

Investors interested in Automotive - Original Equipment stocks are likely familiar with Atmus Filtration Technologies (ATMU) and Ferrari (RACE). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Atmus Filtration Technologies has a Zacks Rank of #2 (Buy), while Ferrari has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ATMU has an improving earnings 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 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.

ATMU currently has a forward P/E ratio of 16.63, while RACE has a forward P/E of 36.17. We also note that ATMU has a PEG ratio of 2.10. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. RACE currently has a PEG ratio of 3.47.

Another notable valuation metric for ATMU is its P/B ratio of 8.91. 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 22.33.

These metrics, and several others, help ATMU earn a Value grade of B, while RACE has been given a Value grade of D.

ATMU 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 ATMU is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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