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CMTL vs. IDCC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research

Investors interested in Wireless Equipment stocks are likely familiar with Comtech Telecommunications (CMTL) and InterDigital (IDCC). 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.

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.

Currently, Comtech Telecommunications has a Zacks Rank of #1 (Strong Buy), while InterDigital has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that CMTL likely has seen a stronger improvement to its earnings outlook than IDCC 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 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.

CMTL currently has a forward P/E ratio of 33.67, while IDCC has a forward P/E of 108.89. We also note that CMTL has a PEG ratio of 6.73. 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. IDCC currently has a PEG ratio of 7.26.

Another notable valuation metric for CMTL is its P/B ratio of 1.35. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, IDCC has a P/B of 2.49.

These metrics, and several others, help CMTL earn a Value grade of B, while IDCC has been given a Value grade of D.

CMTL 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 CMTL is likely the superior value option right now.


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Comtech Telecommunications Corp. (CMTL) : Free Stock Analysis Report
 
InterDigital, Inc. (IDCC) : Free Stock Analysis Report
 
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