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Should Value Investors Consider Skyworks Solutions (SWKS) Stock?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Skyworks Solutions, Inc. (SWKS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Skyworks Solutions has a trailing twelve months PE ratio of 18.2, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at 20.7. If we focus on the long-term PE trend, the current PE level is above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 22.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Skyworks Solutions has a forward PE ratio (price relative to this year’s earnings) of 15.1, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Skyworks Solutions’ PEG ratio stands at just 1, compared with the sector’s average of 2. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Skyworks Solutions currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Skyworks Solutions a solid choice for value investors.
What About the Stock Overall?
Though Skyworks Solutions might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives SWKS a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen four estimates go higher in the past thirty days compared to two lower, while the next year estimate has one up and one down in the same time period.
As a result, the consensus estimate for the current year has risen by 0.3% in the past month, while the next year estimate has inched higher by 15.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Even though Skyworks Solutions has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Skyworks Solutions is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a good industry rank (among the Top 44%), Skyworks Solutions looks like a strong value contender. In fact, over the past one year, its industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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Should Value Investors Consider Skyworks Solutions (SWKS) Stock?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Skyworks Solutions, Inc. (SWKS - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Skyworks Solutions has a trailing twelve months PE ratio of 18.2, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at 20.7. If we focus on the long-term PE trend, the current PE level is above its midpoint over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares favorably with its sector’s trailing twelve months PE ratio, which stands at 22.9. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Skyworks Solutions has a forward PE ratio (price relative to this year’s earnings) of 15.1, so it is fair to say that a slightly more value-oriented path may be ahead for the stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate).The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Skyworks Solutions’ PEG ratio stands at just 1, compared with the sector’s average of 2. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Broad Value Outlook
In aggregate, Skyworks Solutions currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Skyworks Solutions a solid choice for value investors.
What About the Stock Overall?
Though Skyworks Solutions might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives SWKS a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been encouraging. The current year has seen four estimates go higher in the past thirty days compared to two lower, while the next year estimate has one up and one down in the same time period.
As a result, the consensus estimate for the current year has risen by 0.3% in the past month, while the next year estimate has inched higher by 15.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Skyworks Solutions, Inc. Price and Consensus
Skyworks Solutions, Inc. Price and Consensus | Skyworks Solutions, Inc. Quote
Even though Skyworks Solutions has a better estimates trend, the stock has just a Zacks Rank #3 (Hold). That is why we are looking for in-line performance from the company in the near term.
Bottom Line
Skyworks Solutions is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a good industry rank (among the Top 44%), Skyworks Solutions looks like a strong value contender. In fact, over the past one year, its industry has clearly outperformed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>