Investors with an interest in Electronics - Miscellaneous Components stocks have likely encountered both Fabrinet (FN) and TE Connectivity (TEL). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Fabrinet is sporting a Zacks Rank of #2 (Buy), while TE Connectivity has a Zacks Rank of #3 (Hold). This means that FN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle 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 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.
FN currently has a forward P/E ratio of 12.65, while TEL has a forward P/E of 13.08. We also note that FN has a PEG ratio of 0.97. 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. TEL currently has a PEG ratio of 1.20.
Another notable valuation metric for FN is its P/B ratio of 1.92. 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, TEL has a P/B of 2.14.
These are just a few of the metrics contributing to FN's Value grade of B and TEL's Value grade of C.
FN has seen stronger estimate revision activity and sports more attractive valuation metrics than TEL, so it seems like value investors will conclude that FN is the superior option right now.
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Fabrinet (FN) : Free Stock Analysis Report
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