Investors interested in Wireless Equipment stocks are likely familiar with Nokia (NOK - Free Report) and InterDigital (IDCC - Free Report) . 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.
Right now, Nokia is sporting a Zacks Rank of #2 (Buy), while InterDigital has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that NOK is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
NOK currently has a forward P/E ratio of 16.65, while IDCC has a forward P/E of 58.55. We also note that NOK has a PEG ratio of 1.07. 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. IDCC currently has a PEG ratio of 3.90.
Another notable valuation metric for NOK is its P/B ratio of 1.51. 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, IDCC has a P/B of 2.38.
Based on these metrics and many more, NOK holds a Value grade of B, while IDCC has a Value grade of D.
NOK sticks out from IDCC in both our Zacks Rank and Style Scores models, so value investors will likely feel that NOK is the better option right now.