Investors with an interest in Electronics - Semiconductors stocks have likely encountered both ASE Technology Hldg (ASX - Free Report) and Broadcom Inc. (AVGO - 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.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
ASE Technology Hldg has a Zacks Rank of #1 (Strong Buy), while Broadcom Inc. has a Zacks Rank of #3 (Hold) right now. This means that ASX'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 also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
ASX currently has a forward P/E ratio of 11.76, while AVGO has a forward P/E of 12.30. We also note that ASX has a PEG ratio of 0.44. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AVGO currently has a PEG ratio of 1.06.
Another notable valuation metric for ASX is its P/B ratio of 1.30. 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, AVGO has a P/B of 4.27.
These metrics, and several others, help ASX earn a Value grade of A, while AVGO has been given a Value grade of C.
ASX stands above AVGO thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ASX is the superior value option right now.