Investors with an interest in Automotive - Domestic stocks have likely encountered both General Motors (GM) and Tesla (TSLA). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, General Motors has a Zacks Rank of #2 (Buy), while Tesla has a Zacks Rank of #3 (Hold). This means that GM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 4.09, while TSLA has a forward P/E of 80.39. We also note that GM has a PEG ratio of 0.65. 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. TSLA currently has a PEG ratio of 3.40.

Another notable valuation metric for GM is its P/B ratio of 0.71. 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, TSLA has a P/B of 10.52.

These metrics, and several others, help GM earn a Value grade of A, while TSLA has been given a Value grade of F.

GM has seen stronger estimate revision activity and sports more attractive valuation metrics than TSLA, so it seems like value investors will conclude that GM is the superior option right now.

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

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