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Investors interested in Semiconductor - General stocks are likely familiar with STMicroelectronics (STM) and Texas Instruments (TXN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, STMicroelectronics has 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. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
STM currently has a forward P/E ratio of 21.82, while TXN has a forward P/E of 28.31. We also note that STM has a PEG ratio of 0.76. 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 2.45.
Another notable valuation metric for STM is its P/B ratio of 0.94. 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. By comparison, TXN has a P/B of 8.15.
These are just a few of the metrics contributing to STM's Value grade of A and TXN's Value grade of D.
STM sticks out from TXN in both our Zacks Rank and Style Scores models, so value investors will likely feel that STM is the better option right now.
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STMicroelectronics N.V. (STM) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).