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XCRA vs. STM: Which Stock Is the Better Value Option?

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Investors with an interest in Semiconductor - General stocks have likely encountered both Xcerra and STMicroelectronics (STM - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Both Xcerra and STMicroelectronics have a Zacks Rank of # 2 (Buy) right now. 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. However, value investors will care about much more than just this.

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.

XCRA currently has a forward P/E ratio of 13.57, while STM has a forward P/E of 15.90. We also note that XCRA has a PEG ratio of 1.13. 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. STM currently has a PEG ratio of 3.18.

Another notable valuation metric for XCRA is its P/B ratio of 2.14. 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, STM has a P/B of 3.52.

These are just a few of the metrics contributing to XCRA's Value grade of B and STM's Value grade of D.

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.


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