Investors with an interest in Electronics - Semiconductors stocks have likely encountered both Cirrus Logic (CRUS - Free Report) and Pixelworks (PXLW - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Cirrus Logic and Pixelworks 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. But this is just one factor that value investors are interested in.
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.
CRUS currently has a forward P/E ratio of 12.12, while PXLW has a forward P/E of 58.83. We also note that CRUS has a PEG ratio of 0.81. 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. PXLW currently has a PEG ratio of 2.94.
Another notable valuation metric for CRUS is its P/B ratio of 2.09. 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, PXLW has a P/B of 3.85.
These are just a few of the metrics contributing to CRUS's Value grade of B and PXLW's Value grade of D.
Both CRUS and PXLW are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CRUS is the superior value option right now.