Investors with an interest in Electronics - Miscellaneous Components stocks have likely encountered both OSI Systems (OSIS) and Universal Display Corp. (OLED). But which of these two companies is the best option for those looking for undervalued stocks? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, both OSI Systems and Universal Display Corp. are sporting a Zacks Rank of # 2 (Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
OSIS currently has a forward P/E ratio of 21.09, while OLED has a forward P/E of 65.25. We also note that OSIS has a PEG ratio of 1.69. 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. OLED currently has a PEG ratio of 2.17.
Another notable valuation metric for OSIS is its P/B ratio of 3.37. 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, OLED has a P/B of 10.98.
Based on these metrics and many more, OSIS holds a Value grade of B, while OLED has a Value grade of F.
Both OSIS and OLED are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that OSIS is the superior value option right now.
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