Investors with an interest in Electronics - Manufacturing Machinery stocks have likely encountered both Ultra Clean Holdings (UCTT - Free Report) and Cohu (COHU - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, both Ultra Clean Holdings and Cohu are sporting a Zacks Rank of # 2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
UCTT currently has a forward P/E ratio of 7.56, while COHU has a forward P/E of 14.84. We also note that UCTT has a PEG ratio of 0.54. 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. COHU currently has a PEG ratio of 1.86.
Another notable valuation metric for UCTT is its P/B ratio of 1.65. 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, COHU has a P/B of 2.46.
Based on these metrics and many more, UCTT holds a Value grade of A, while COHU has a Value grade of D.
Both UCTT and COHU are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that UCTT is the superior value option right now.