Investors looking for stocks in the Electronics - Miscellaneous Components sector might want to consider either OSI Systems (OSIS) or Universal Display Corp. (OLED). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
OSI Systems has a Zacks Rank of #2 (Buy), while Universal Display Corp. has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that OSIS has an improving earnings outlook. 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.
OSIS currently has a forward P/E ratio of 15.05, while OLED has a forward P/E of 39.85. We also note that OSIS has a PEG ratio of 1.37. 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 1.82.
Another notable valuation metric for OSIS is its P/B ratio of 2.79. 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 5.60.
These are just a few of the metrics contributing to OSIS's Value grade of A and OLED's Value grade of C.
OSIS 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 OSIS is likely the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report