Investors interested in Semiconductor - General stocks are likely familiar with 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, STMicroelectronics has a Zacks Rank of #2 (Buy), while Texas Instruments has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that STM likely has seen a stronger improvement to its earnings outlook than TXN has recently. However, value investors will care about much more than just this.
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 39.05, while TXN has a forward P/E of 39.66. We also note that STM has a PEG ratio of 1.87. 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 3.58.
Another notable valuation metric for STM is its P/B ratio of 1.59. 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 12.19.
Based on these metrics and many more, STM holds a Value grade of B, while TXN has a Value grade of D.
STM has seen stronger estimate revision activity and sports more attractive valuation metrics than TXN, so it seems like value investors will conclude that STM is the superior option right now.
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STMicroelectronics N.V. (STM): Free Stock Analysis Report Texas Instruments Incorporated (TXN): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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