Investors with an interest in Semiconductor - General stocks have likely encountered both Xcerra and STMicroelectronics (STM - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both Xcerra and STMicroelectronics are sporting a Zacks Rank of # 2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture 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.
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.
XCRA currently has a forward P/E ratio of 13.85, while STM has a forward P/E of 16.46. We also note that XCRA has a PEG ratio of 1.15. 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. STM currently has a PEG ratio of 3.29.
Another notable valuation metric for XCRA is its P/B ratio of 2.17. 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, STM has a P/B of 3.53.
These are just a few of the metrics contributing to XCRA's Value grade of B and STM's Value grade of C.
Both XCRA and STM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that XCRA is the superior value option right now.