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Is Honda Motor (HMC) Stock Undervalued Right Now?

Zacks Equity Research
·3-min read

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, 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 use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

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 value investors might notice is Honda Motor (HMC). HMC is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock holds a P/E ratio of 8.40, while its industry has an average P/E of 18.49. HMC's Forward P/E has been as high as 14.24 and as low as 5.51, with a median of 11.12, all within the past year.

Investors should also note that HMC holds a PEG ratio of 0.44. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. HMC's PEG compares to its industry's average PEG of 1.19. Over the last 12 months, HMC's PEG has been as high as 3.48 and as low as 0.43, with a median of 0.70.

Another notable valuation metric for HMC is its P/B ratio of 0.63. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. HMC's current P/B looks attractive when compared to its industry's average P/B of 0.84. HMC's P/B has been as high as 0.67 and as low as 0.43, with a median of 0.58, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's 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. HMC has a P/S ratio of 0.4. This compares to its industry's average P/S of 0.46.

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


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Zacks Investment Research