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Should Value Investors Buy AutoNation (AN) Stock?

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One stock to keep an eye on is AutoNation (AN). AN is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value.

AN is also sporting a PEG ratio of 0.42. 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. AN's PEG compares to its industry's average PEG of 0.45. Over the last 12 months, AN's PEG has been as high as 1.37 and as low as 0.39, with a median of 0.96.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. AN has a P/S ratio of 0.35. This compares to its industry's average P/S of 0.46.

Finally, we should also recognize that AN has a P/CF ratio of 7.97. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 10.44. AN's P/CF has been as high as 9.20 and as low as 5.56, with a median of 7.49, all within the past year.

These figures are just a handful of the metrics value investors tend to look at, but they help show that AutoNation is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, AN feels like a great value stock at the moment.


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AutoNation, Inc. (AN): Free Stock Analysis Report
 
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