Investors with an interest in Electronics - Miscellaneous Products stocks have likely encountered both Royal Philips (PHG) and Garmin (GRMN). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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.
Currently, Royal Philips has a Zacks Rank of #1 (Strong Buy), while Garmin has a Zacks Rank of #3 (Hold). This means that PHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PHG currently has a forward P/E ratio of 19.05, while GRMN has a forward P/E of 21.34. We also note that PHG has a PEG ratio of 1.32. 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. GRMN currently has a PEG ratio of 2.90.
Another notable valuation metric for PHG is its P/B ratio of 2.60. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GRMN has a P/B of 3.62.
These are just a few of the metrics contributing to PHG's Value grade of B and GRMN's Value grade of D.
PHG 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 PHG is likely the superior value option right now.
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Koninklijke Philips N.V. (PHG) : Free Stock Analysis Report
Garmin Ltd. (GRMN) : Free Stock Analysis Report
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