Does Qorvo Offer a Good Value Buy Opportunity Right Now?
Zacks Equity Research
Updated
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Qorvo, Inc. QRVO stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Qorvo has a trailing twelve months PE ratio of 17.63, as you can see in the chart below:
This level actually compares pretty favorably with the market at large as well, as the PE for the S&P 500 stands at about 20.11. If we focus on the PE trend, Qorvo’s current PE level puts it above its midpoint (which stands at 15.26) over the past two years.
Further, the stock’s PE also compares favorably with the Zacks classified Semiconductors Radio Frequency industry’s trailing twelve months PE ratio, which stands at 18.43. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Qorvo has a forward PE ratio (price relative to this year’s earnings) of 16.48, so it is fair to say that a slightly more value-oriented path may be ahead for Qorvo stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate). The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Qorvo’s PEG ratio stands at just 1.04, compared with the S&P 500’s average of 1.88. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Qorvo currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Qorvo a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/S ratio (another great indicator of value) comes in at 2.63, which is better than the industry average of 3.71.
Clearly, Qorvo is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Qorvo might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘F’. This gives QRVO a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. While the current quarter has seen one estimate go lower in the past sixty days compared to none higher, the full year estimate for the next year has seen one upward revision and no downward revision in the same time period.
This has had a clear bearish impact on the consensus estimate though, as the current quarter consensus estimate has fallen by 1.9% in the past thirty days, while the full year estimate for the next year has declined by 1.3%.
You can see the consensus estimate trend and recent price action for the stock in the chart below:
Qorvo, Inc. Price and Consensus
Qorvo, Inc. Price and Consensus | Qorvo, Inc. Quote
This bearish trend is why the stock has just a Zacks Rank #3 (Hold) despite good value metrics and why we are looking for in-line performance from the company in the near term.
Bottom Line
Qorvo is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Despite bearish analyst sentiment, the company has a good industry rank (Top 12% out of more than 250 industries), which indicates that broader factors are favorable for the company.
In fact, over the past three years, the Zacks categorized Semiconductors Radio Frequency industry has clearly outperformed the broader market, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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