Investors with an interest in Communication - Components stocks have likely encountered both Arris Group and Acacia Communications, Inc. (ACIA - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Arris Group has a Zacks Rank of #2 (Buy), while Acacia Communications, Inc. has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that ARRS likely has seen a stronger improvement to its earnings outlook than ACIA has recently. But this is just one piece of the puzzle 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
ARRS currently has a forward P/E ratio of 10.40, while ACIA has a forward P/E of 50.81. We also note that ARRS has a PEG ratio of 1.60. 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. ACIA currently has a PEG ratio of 4.09.
Another notable valuation metric for ARRS is its P/B ratio of 1.87. 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, ACIA has a P/B of 3.25.
Based on these metrics and many more, ARRS holds a Value grade of A, while ACIA has a Value grade of D.
ARRS sticks out from ACIA in both our Zacks Rank and Style Scores models, so value investors will likely feel that ARRS is the better option right now.