GM vs. TSLA: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Automotive - Domestic sector might want to consider either General Motors Company (GM) or Tesla (TSLA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
General Motors Company and Tesla are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This means that GM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
GM currently has a forward P/E ratio of 8.52, while TSLA has a forward P/E of 141.89. We also note that GM has a PEG ratio of 0.86. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TSLA currently has a PEG ratio of 4.05.
Another notable valuation metric for GM is its P/B ratio of 1.54. 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, TSLA has a P/B of 27.40.
These metrics, and several others, help GM earn a Value grade of A, while TSLA has been given a Value grade of F.
GM 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 GM is likely the superior value option right now.
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