Investors interested in Electronics - Miscellaneous Products stocks are likely familiar with Royal Philips (PHG - Free Report) and Trimble Navigation (TRMB - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, Royal Philips has a Zacks Rank of #2 (Buy), while Trimble Navigation has a Zacks Rank of #3 (Hold). This means that PHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
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 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.
PHG currently has a forward P/E ratio of 19.72, while TRMB has a forward P/E of 21.59. We also note that PHG has a PEG ratio of 2.08. 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. TRMB currently has a PEG ratio of 2.27.
Another notable valuation metric for PHG is its P/B ratio of 2.86. 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, TRMB has a P/B of 3.32.
These are just a few of the metrics contributing to PHG's Value grade of B and TRMB's Value grade of C.
PHG sticks out from TRMB in both our Zacks Rank and Style Scores models, so value investors will likely feel that PHG is the better option right now.