Investors looking for stocks in the Automotive - Original Equipment sector might want to consider either Dana (DAN) or Modine (MOD). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Dana has a Zacks Rank of #2 (Buy), while Modine has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that DAN has an improving earnings outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

DAN currently has a forward P/E ratio of 6.74, while MOD has a forward P/E of 16.66. We also note that DAN has a PEG ratio of 0.35. 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. MOD currently has a PEG ratio of 0.49.

Another notable valuation metric for DAN is its P/B ratio of 1.12. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, MOD has a P/B of 4.66.

These metrics, and several others, help DAN earn a Value grade of A, while MOD has been given a Value grade of C.

DAN has seen stronger estimate revision activity and sports more attractive valuation metrics than MOD, so it seems like value investors will conclude that DAN is the superior option right now.

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Dana Incorporated (DAN) : Free Stock Analysis Report

Modine Manufacturing Company (MOD) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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