Back to top

Image: Bigstock

STM vs. TXN: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors interested in stocks from the Semiconductor - General sector have probably already heard of STMicroelectronics (STM - Free Report) and Texas Instruments (TXN - 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

STMicroelectronics and Texas Instruments are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that STM'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 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.

STM currently has a forward P/E ratio of 11.68, while TXN has a forward P/E of 23.51. We also note that STM has a PEG ratio of 2.34. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TXN currently has a PEG ratio of 2.52.

Another notable valuation metric for STM is its P/B ratio of 3.38. 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, TXN has a P/B of 11.01.

Based on these metrics and many more, STM holds a Value grade of B, while TXN has a Value grade of D.

STM has seen stronger estimate revision activity and sports more attractive valuation metrics than TXN, so it seems like value investors will conclude that STM is the superior option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Texas Instruments Incorporated (TXN) - free report >>

STMicroelectronics N.V. (STM) - free report >>

Published in