Investors interested in Computer - Integrated Systems stocks are likely familiar with Hewlett Packard Enterprise (HPE) and Silicon Motion (SIMO). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Hewlett Packard Enterprise has a Zacks Rank of #2 (Buy), while Silicon Motion 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 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
HPE currently has a forward P/E ratio of 13.02, while SIMO has a forward P/E of 26.58. We also note that HPE has a PEG ratio of 2.06. 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 3.77.
Another notable valuation metric for HPE is its P/B ratio of 1.34. 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, SIMO has a P/B of 3.84.
These are just a few of the metrics contributing to HPE's Value grade of B and SIMO's Value grade of F.
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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Hewlett Packard Enterprise Company (HPE): Free Stock Analysis Report Silicon Motion Technology Corporation (SIMO): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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