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MACOM Technology Solutions Holdings, Inc. (MTSI) - free report >>
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MACOM Technology Solutions Holdings, Inc. (MTSI) - free report >>
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ON vs. MTSI: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Semiconductor - Analog and Mixed sector might want to consider either ON Semiconductor Corp. (ON - Free Report) or M/A-Com (MTSI - Free Report) . 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.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
ON Semiconductor Corp. and M/A-Com are both sporting a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.
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.
ON currently has a forward P/E ratio of 22.05, while MTSI has a forward P/E of 27.36. We also note that ON has a PEG ratio of 0.53. 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. MTSI currently has a PEG ratio of 0.74.
Another notable valuation metric for ON is its P/B ratio of 4.27. 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, MTSI has a P/B of 8.99.
These are just a few of the metrics contributing to ON's Value grade of B and MTSI's Value grade of D.
Both ON and MTSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ON is the superior value option right now.