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ERIC vs. MSI: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Wireless Equipment sector might want to consider either Ericsson (ERIC - Free Report) or Motorola (MSI - Free Report) . 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.

Ericsson has a Zacks Rank of #2 (Buy), while Motorola has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ERIC has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

ERIC currently has a forward P/E ratio of 12.96, while MSI has a forward P/E of 25.02. We also note that ERIC has a PEG ratio of 1.54. 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. MSI currently has a PEG ratio of 2.76.

Another notable valuation metric for ERIC is its P/B ratio of 3.01. 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, MSI has a P/B of 26.89.

These are just a few of the metrics contributing to ERIC's Value grade of A and MSI's Value grade of C.

ERIC 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 ERIC is likely the superior value option right now.


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