Investors with an interest in Electronics - Semiconductors stocks have likely encountered both Silicon Motion (SIMO) and Lattice Semiconductor (LSCC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, Silicon Motion is sporting a Zacks Rank of #1 (Strong Buy), while Lattice Semiconductor has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SIMO likely has seen a stronger improvement to its earnings outlook than LSCC has recently. But this is just one factor that value investors are interested in.
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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SIMO currently has a forward P/E ratio of 14.48, while LSCC has a forward P/E of 29.67. We also note that SIMO has a PEG ratio of 2.07. 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. LSCC currently has a PEG ratio of 2.37.
Another notable valuation metric for SIMO is its P/B ratio of 3.10. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LSCC has a P/B of 8.96.
These metrics, and several others, help SIMO earn a Value grade of B, while LSCC has been given a Value grade of F.
SIMO is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SIMO is likely the superior value option right now.
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