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Silicon Motion Technology Corporation (SIMO) - free report >>
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Silicon Motion Technology Corporation (SIMO) - free report >>
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SIMO or AMBA: Which Is the Better Value Stock Right Now?
Investors with an interest in Electronics - Semiconductors stocks have likely encountered both Silicon Motion (SIMO - Free Report) and Ambarella (AMBA - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Silicon Motion has a Zacks Rank of #2 (Buy), while Ambarella has a Zacks Rank of #5 (Strong Sell). This means that SIMO's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
SIMO currently has a forward P/E ratio of 10.76, while AMBA has a forward P/E of 49.08. We also note that SIMO has a PEG ratio of 1.20. 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. AMBA currently has a PEG ratio of 3.56.
Another notable valuation metric for SIMO is its P/B ratio of 4.42. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, AMBA has a P/B of 5.76.
These metrics, and several others, help SIMO earn a Value grade of B, while AMBA has been given a Value grade of F.
SIMO sticks out from AMBA in both our Zacks Rank and Style Scores models, so value investors will likely feel that SIMO is the better option right now.