October 20, 2020

Is Sonic Automotive (SAH) Stock Undervalued Right Now?

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system’s “Value” category. Stocks with both “A” grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Sonic Automotive (SAH) is a stock many investors are watching right now. SAH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with P/E ratio of 10.27 right now. For comparison, its industry sports an average P/E of 10.94. SAH’s Forward P/E has been as high as 18.22 and as low as 3.51, with a median of 11.40, all within the past year.

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. SAH has a P/S ratio of 0.17. This compares to its industry’s average P/S of 0.27.

These are only a few of the key metrics included in Sonic Automotive’s strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, SAH looks like an impressive value stock at the moment.

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