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UMC vs. LSCC: Which Stock Is the Better Value Option?

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Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of United Microelectronics Corporation (UMC - Free Report) and Lattice Semiconductor (LSCC - 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

United Microelectronics Corporation has a Zacks Rank of #2 (Buy), while Lattice Semiconductor has a Zacks Rank of #3 (Hold) right now. This means that UMC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 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.

UMC currently has a forward P/E ratio of 13.95, while LSCC has a forward P/E of 72.50. We also note that UMC has a PEG ratio of 0.52. 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. LSCC currently has a PEG ratio of 7.25.

Another notable valuation metric for UMC is its P/B ratio of 2.96. 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, LSCC has a P/B of 23.54.

Based on these metrics and many more, UMC holds a Value grade of A, while LSCC has a Value grade of D.

UMC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UMC is likely the superior value option right now.


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