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Are Investors Undervaluing United Microelectronics (UMC) Right Now?
While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.
Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One stock to keep an eye on is United Microelectronics (UMC - Free Report) . UMC is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 6.90, while its industry has an average P/E of 14.72. Over the past 52 weeks, UMC's Forward P/E has been as high as 16.88 and as low as 6.51, with a median of 11.59.
Investors will also notice that UMC has a PEG ratio of 0.26. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. UMC's PEG compares to its industry's average PEG of 0.56. UMC's PEG has been as high as 0.87 and as low as 0.26, with a median of 0.44, all within the past year.
Another notable valuation metric for UMC is its P/B ratio of 1.87. 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. UMC's current P/B looks attractive when compared to its industry's average P/B of 4.35. Within the past 52 weeks, UMC's P/B has been as high as 3.61 and as low as 1.73, with a median of 2.74.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. UMC has a P/S ratio of 2.5. This compares to its industry's average P/S of 2.53.
Finally, we should also recognize that UMC has a P/CF ratio of 5.36. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. UMC's P/CF compares to its industry's average P/CF of 19.93. Over the past year, UMC's P/CF has been as high as 10.44 and as low as 4.96, with a median of 8.
These are just a handful of the figures considered in United Microelectronics's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that UMC is an impressive value stock right now.