ADI vs. MTSI: Which Stock Is the Better Value Option?
Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with Analog Devices (ADI) and M/A-Com (MTSI). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Analog Devices and M/A-Com are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ADI is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
ADI currently has a forward P/E ratio of 17.44, while MTSI has a forward P/E of 23.04. We also note that ADI has a PEG ratio of 1.42. 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. MTSI currently has a PEG ratio of 2.36.
Another notable valuation metric for ADI is its P/B ratio of 2.57. 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, MTSI has a P/B of 5.78.
These metrics, and several others, help ADI earn a Value grade of B, while MTSI has been given a Value grade of C.
ADI has seen stronger estimate revision activity and sports more attractive valuation metrics than MTSI, so it seems like value investors will conclude that ADI is the superior option right now.
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Analog Devices, Inc. (ADI) : Free Stock Analysis Report
MACOM Technology Solutions Holdings, Inc. (MTSI) : Free Stock Analysis Report
