HPE or SIMO: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Computer - Integrated Systems sector have probably already heard of Hewlett Packard Enterprise (HPE) and Silicon Motion (SIMO). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. 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.

Hewlett Packard Enterprise and Silicon Motion are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that HPE 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 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.

HPE currently has a forward P/E ratio of 10.92, while SIMO has a forward P/E of 22.79. We also note that HPE has a PEG ratio of 2.46. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SIMO currently has a PEG ratio of 3.24.

Another notable valuation metric for HPE is its P/B ratio of 1.14. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, SIMO has a P/B of 3.29.

Based on these metrics and many more, HPE holds a Value grade of B, while SIMO has a Value grade of D.

HPE 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 HPE is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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