Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with ON Semiconductor Corp. (ON - Free Report) and Silicon Laboratories (SLAB - 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.
ON Semiconductor Corp. has a Zacks Rank of #2 (Buy), while Silicon Laboratories has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ON has 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.
ON currently has a forward P/E ratio of 10.45, while SLAB has a forward P/E of 24.71. We also note that ON has a PEG ratio of 0.79. 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. SLAB currently has a PEG ratio of 1.65.
Another notable valuation metric for ON is its P/B ratio of 2.65. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, SLAB has a P/B of 3.90.
Based on these metrics and many more, ON holds a Value grade of A, while SLAB has a Value grade of D.
ON sticks out from SLAB in both our Zacks Rank and Style Scores models, so value investors will likely feel that ON is the better option right now.