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XCRA vs. STM: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Semiconductor - General sector have probably already heard of Xcerra and STMicroelectronics (STM - Free Report) . 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Xcerra and STMicroelectronics are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. Investors should feel comfortable knowing that XCRA likely has seen a stronger improvement to its earnings outlook than STM has recently. But this is just one factor that value investors are interested in.

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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

XCRA currently has a forward P/E ratio of 13.43, while STM has a forward P/E of 17.59. We also note that XCRA has a PEG ratio of 1.12. 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. STM currently has a PEG ratio of 3.52.

Another notable valuation metric for XCRA is its P/B ratio of 2.10. 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, STM has a P/B of 3.77.

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

XCRA has seen stronger estimate revision activity and sports more attractive valuation metrics than STM, so it seems like value investors will conclude that XCRA is the superior option right now.


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