Investors looking for stocks in the Electronics - Semiconductors sector might want to consider either Qualcomm (QCOM) or Applied Materials (AMAT). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Qualcomm is sporting a Zacks Rank of #2 (Buy), while Applied Materials has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that QCOM is likely seeing its earnings outlook improve to a greater extent. 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.
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.
QCOM currently has a forward P/E ratio of 12.54, while AMAT has a forward P/E of 16.18. We also note that QCOM has a PEG ratio of 1.36. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. AMAT currently has a PEG ratio of 1.60.
Another notable valuation metric for QCOM is its P/B ratio of 6.14. 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, AMAT has a P/B of 6.61.
Based on these metrics and many more, QCOM holds a Value grade of B, while AMAT has a Value grade of C.
QCOM has seen stronger estimate revision activity and sports more attractive valuation metrics than AMAT, so it seems like value investors will conclude that QCOM is the superior option right now.
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QUALCOMM Incorporated (QCOM): Free Stock Analysis Report Applied Materials, Inc. (AMAT): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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