Investors interested in stocks from the Automotive - Original Equipment sector have probably already heard of Allison Transmission (ALSN) and Ferrari (RACE). 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Allison Transmission and Ferrari are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ALSN is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

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 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.

ALSN currently has a forward P/E ratio of 12.96, while RACE has a forward P/E of 46.41. We also note that ALSN has a PEG ratio of 1.89. 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. RACE currently has a PEG ratio of 3.73.

Another notable valuation metric for ALSN is its P/B ratio of 6.39. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RACE has a P/B of 28.89.

Based on these metrics and many more, ALSN holds a Value grade of B, while RACE has a Value grade of D.

ALSN 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 ALSN is likely the superior value option right now.

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Allison Transmission Holdings, Inc. (ALSN) : Free Stock Analysis Report

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