MG vs. TER: Which Stock Is the Better Value Option?

Investors interested in stocks from the Electronics - Miscellaneous Products sector have probably already heard of Mistras (MG) and Teradyne (TER). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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, both Mistras and Teradyne are holding a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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.

MG currently has a forward P/E ratio of 14.66, while TER has a forward P/E of 52.68. We also note that MG has a PEG ratio of 0.92. 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. TER currently has a PEG ratio of 1.93.

Another notable valuation metric for MG is its P/B ratio of 1.66. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, TER has a P/B of 10.51.

These metrics, and several others, help MG earn a Value grade of A, while TER has been given a Value grade of D.

Both MG and TER are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MG is the superior value option right now.

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

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