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Should Value Investors Buy Group 1 Automotive (GPI) Stock?

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

One company to watch right now is Group 1 Automotive (GPI). GPI is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock is trading with P/E ratio of 9.07 right now. For comparison, its industry sports an average P/E of 11.37. Over the last 12 months, GPI's Forward P/E has been as high as 9.75 and as low as 2.64, with a median of 8.26.

Another valuation metric that we should highlight is GPI's P/B ratio of 1.41. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.50. GPI's P/B has been as high as 1.71 and as low as 0.48, with a median of 1.34, over the past year.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. GPI has a P/S ratio of 0.15. This compares to its industry's average P/S of 0.29.

Finally, we should also recognize that GPI has a P/CF ratio of 7.72. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 11.41. Within the past 12 months, GPI's P/CF has been as high as 8.52 and as low as 2.43, with a median of 6.84.

Value investors will likely look at more than just these metrics, but the above data helps show that Group 1 Automotive is likely undervalued currently. And when considering the strength of its earnings outlook, GPI sticks out at as one of the market's strongest value stocks.


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