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MCHP vs. MXIM: Which Stock Is the Better Value Option?

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Investors looking for stocks in the Semiconductor - Analog and Mixed sector might want to consider either Microchip Technology (MCHP - Free Report) or Maxim Integrated Products (MXIM - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Microchip Technology has a Zacks Rank of #2 (Buy), while Maxim Integrated Products has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that MCHP likely has seen a stronger improvement to its earnings outlook than MXIM has recently. But this is just one piece of the puzzle for value investors.

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.

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.

MCHP currently has a forward P/E ratio of 14.23, while MXIM has a forward P/E of 22.17. We also note that MCHP has a PEG ratio of 1.02. 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. MXIM currently has a PEG ratio of 2.16.

Another notable valuation metric for MCHP is its P/B ratio of 6.65. 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, MXIM has a P/B of 8.52.

These are just a few of the metrics contributing to MCHP's Value grade of B and MXIM's Value grade of C.

MCHP 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 MCHP is likely the superior value option right now.




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