Investors looking for stocks in the Electronics - Semiconductors sector might want to consider either ASE Technology Hldg (ASX) or Lattice Semiconductor (LSCC). But which of these two stocks presents investors with the better value opportunity right now? 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 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.
ASE Technology Hldg has a Zacks Rank of #2 (Buy), while Lattice Semiconductor has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ASX is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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 14, while LSCC has a forward P/E of 66.31. We also note that ASX has a PEG ratio of 0.94. 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 6.63.
Another notable valuation metric for ASX is its P/B ratio of 2.21. 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, LSCC has a P/B of 19.14.
These are just a few of the metrics contributing to ASX's Value grade of A and LSCC's Value grade of D.
ASX stands above LSCC thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ASX is the superior value option right now.
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