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Investors interested in stocks from the Semiconductor - Analog and Mixed sector have probably already heard of MaxLinear (MXL) and M/A-Com (MTSI). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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.
Both MaxLinear and M/A-Com have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.
MXL currently has a forward P/E ratio of 8.58, while MTSI has a forward P/E of 16.55. We also note that MXL has a PEG ratio of 0.43. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MTSI currently has a PEG ratio of 1.04.
Another notable valuation metric for MXL is its P/B ratio of 5.12. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, MTSI has a P/B of 5.74.
These metrics, and several others, help MXL earn a Value grade of B, while MTSI has been given a Value grade of C.
Both MXL and MTSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that MXL is the superior value option right now.