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IDCC or SWIR: Which Is the Better Value Stock Right Now?
Investors with an interest in Wireless Equipment stocks have likely encountered both InterDigital (IDCC - Free Report) and Sierra Wireless . But which of these two stocks presents investors with the better value opportunity right now? 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.
InterDigital has a Zacks Rank of #1 (Strong Buy), while Sierra Wireless has a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that IDCC likely has seen a stronger improvement to its earnings outlook than SWIR has recently. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
IDCC currently has a forward P/E ratio of 20.50, while SWIR has a forward P/E of 32.82. We also note that IDCC has a PEG ratio of 0.82. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. SWIR currently has a PEG ratio of 2.19.
Another notable valuation metric for IDCC is its P/B ratio of 2.26. 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, SWIR has a P/B of 4.10.
These metrics, and several others, help IDCC earn a Value grade of B, while SWIR has been given a Value grade of C.
IDCC 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 IDCC is likely the superior value option right now.