Back to top

Image: Bigstock

ON vs. MPWR: Which Stock Should Value Investors Buy Now?

Read MoreHide Full Article

Investors interested in stocks from the Semiconductor - Analog and Mixed sector have probably already heard of ON Semiconductor Corp. (ON - Free Report) and Monolithic Power (MPWR - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both ON Semiconductor Corp. and Monolithic Power are holding a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. 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.

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.

ON currently has a forward P/E ratio of 19.31, while MPWR has a forward P/E of 52.06. We also note that ON has a PEG ratio of 0.43. 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. MPWR currently has a PEG ratio of 2.08.

Another notable valuation metric for ON is its P/B ratio of 4.36. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MPWR has a P/B of 15.39.

These are just a few of the metrics contributing to ON's Value grade of B and MPWR's Value grade of F.

Both ON and MPWR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ON is the superior value option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Monolithic Power Systems, Inc. (MPWR) - free report >>

ON Semiconductor Corporation (ON) - free report >>

Published in