Investors looking for stocks in the Semiconductor – General sector might want to consider either STMicroelectronics (STM) or Texas Instruments (TXN). But which of these two stocks offers value investors a better bang for their buck right now? We’ll need to take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, STMicroelectronics is sporting a Zacks Rank of #2 (Buy), while Texas Instruments has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STM has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
STM currently has a forward P/E ratio of 9.44, while TXN has a forward P/E of 18.80. We also note that STM has a PEG ratio of 1.89. 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. TXN currently has a PEG ratio of 2.01.
Another notable valuation metric for STM is its P/B ratio of 3.12. 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, TXN has a P/B of 10.91.
These metrics, and several others, help STM earn a Value grade of A, while TXN has been given a Value grade of C.
STM is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that STM is likely the superior value option right now.
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