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Are Investors Undervaluing Honda Motor (HMC) Right Now?

Zacks Equity Research
·3-min read

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 fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company to watch right now 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 is trading with a P/E ratio of 7.98, which compares to its industry's average of 17.57. Over the past year, HMC's Forward P/E has been as high as 14.24 and as low as 5.51, with a median of 11.12.

Investors should also note that HMC holds a PEG ratio of 0.39. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. HMC's industry currently sports an average PEG of 1.13. HMC's PEG has been as high as 3.48 and as low as 0.39, with a median of 0.67, all within the past year.

Investors should also recognize that HMC has a P/B ratio of 0.59. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus 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 use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. HMC has a P/S ratio of 0.39. This compares to its industry's average P/S of 0.48.

These are only a few of the key metrics included in Honda Motor'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, HMC looks like an impressive value stock at the moment.


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Zacks Investment Research