Investors interested in stocks from the Semiconductor - General sector have probably already heard of STMicroelectronics (STM) and Texas Instruments (TXN). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
STMicroelectronics has a Zacks Rank of #1 (Strong Buy), while Texas Instruments has a Zacks Rank of #2 (Buy) right now. This means that STM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
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 9.53, while TXN has a forward P/E of 18.90. We also note that STM has a PEG ratio of 1.91. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TXN currently has a PEG ratio of 2.02.
Another notable valuation metric for STM is its P/B ratio of 3.29. 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. For comparison, TXN has a P/B of 11.46.
These metrics, and several others, help STM earn a Value grade of B, 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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STMicroelectronics N.V. (STM) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
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