Investors interested in Electronics - Miscellaneous Components stocks are likely familiar with Kyocera (KYOCY - Free Report) and Littelfuse (LFUS - 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Kyocera and Littelfuse are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that KYOCY has an improving earnings outlook. But this is only part of the picture for value investors.
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.
KYOCY currently has a forward P/E ratio of 16.27, while LFUS has a forward P/E of 19.76. We also note that KYOCY has a PEG ratio of 1.27. 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. LFUS currently has a PEG ratio of 1.65.
Another notable valuation metric for KYOCY is its P/B ratio of 1.07. 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, LFUS has a P/B of 2.83.
Based on these metrics and many more, KYOCY holds a Value grade of A, while LFUS has a Value grade of C.
KYOCY has seen stronger estimate revision activity and sports more attractive valuation metrics than LFUS, so it seems like value investors will conclude that KYOCY is the superior option right now.