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ADI or MTSI: Which Is the Better Value Stock Right Now?
Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with Analog Devices (ADI - Free Report) and M/A-Com (MTSI - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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, Analog Devices has a Zacks Rank of #2 (Buy), while M/A-Com has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ADI has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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 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.
ADI currently has a forward P/E ratio of 18.57, while MTSI has a forward P/E of 22.27. We also note that ADI has a PEG ratio of 1.52. 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. MTSI currently has a PEG ratio of 2.28.
Another notable valuation metric for ADI is its P/B ratio of 2.67. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, MTSI has a P/B of 5.57.
These are just a few of the metrics contributing to ADI's Value grade of B and MTSI's Value grade of C.
ADI has seen stronger estimate revision activity and sports more attractive valuation metrics than MTSI, so it seems like value investors will conclude that ADI is the superior option right now.