Investors with an interest in Electronics - Manufacturing Machinery stocks have likely encountered both Kulicke and Soffa (KLIC - Free Report) and Cohu (COHU - 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Kulicke and Soffa is sporting a Zacks Rank of #2 (Buy), while Cohu has a Zacks Rank of #3 (Hold). This means that KLIC's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
KLIC currently has a forward P/E ratio of 12.48, while COHU has a forward P/E of 14.54. We also note that KLIC has a PEG ratio of 1.04. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. COHU currently has a PEG ratio of 1.82.
Another notable valuation metric for KLIC is its P/B ratio of 2.10. 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 2.45.
Based on these metrics and many more, KLIC holds a Value grade of A, while COHU has a Value grade of C.
KLIC stands above COHU thanks to its solid earnings outlook, and based on these valuation figures, we also feel that KLIC is the superior value option right now.