Investors looking for stocks in the Automotive - Foreign sector might want to consider either Toyota Motor Corporation (TM) or Li Auto Inc. Sponsored ADR (LI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Toyota Motor Corporation has a Zacks Rank of #2 (Buy), while Li Auto Inc. Sponsored ADR has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TM has an improving earnings outlook. 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.

TM currently has a forward P/E ratio of 8.14, while LI has a forward P/E of 20.96. We also note that TM has a PEG ratio of 0.31. 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. LI currently has a PEG ratio of 4.45.

Another notable valuation metric for TM is its P/B ratio of 1.01. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LI has a P/B of 3.55.

These are just a few of the metrics contributing to TM's Value grade of A and LI's Value grade of C.

TM stands above LI thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TM is the superior value option right now.

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