Investors interested in Communication - Components stocks are likely familiar with Corning (GLW) and Acacia Communications, Inc. (ACIA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Corning and Acacia Communications, Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that GLW's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
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 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.
GLW currently has a forward P/E ratio of 18.91, while ACIA has a forward P/E of 55.54. We also note that GLW has a PEG ratio of 2.15. 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. ACIA currently has a PEG ratio of 4.47.
Another notable valuation metric for GLW is its P/B ratio of 2.29. 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, ACIA has a P/B of 3.42.
Based on these metrics and many more, GLW holds a Value grade of B, while ACIA has a Value grade of D.
GLW stands above ACIA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that GLW is the superior value option right now.
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