MOD Vs. THRM: Which Stock Is The Better Value Option?
Zacks Investment Research | Feb 16, 2020 11:40PM ET
Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Modine (MOD) and Gentherm (THRM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Modine has a Zacks Rank of #1 (Strong Buy), while Gentherm has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that MOD likely has seen a stronger improvement to its earnings outlook than THRM has recently. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
MOD currently has a forward P/E ratio of 8.95, while THRM has a forward P/E of 19.78. We also note that MOD has a PEG ratio of 0.89. 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. THRM currently has a PEG ratio of 1.52.
Another notable valuation metric for MOD is its P/B ratio of 0.81. 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, THRM has a P/B of 3.44.
These metrics, and several others, help MOD earn a Value grade of A, while THRM has been given a Value grade of C.
MOD 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 MOD is likely the superior value option right now.
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