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STM vs. NVDA: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors interested in stocks from the Semiconductor - General sector have probably already heard of STMicroelectronics (STM) and Nvidia (NVDA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Currently, STMicroelectronics has a Zacks Rank of #2 (Buy), while Nvidia has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that STM likely has seen a stronger improvement to its earnings outlook than NVDA has recently. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

STM currently has a forward P/E ratio of 16.56, while NVDA has a forward P/E of 35.10. We also note that STM has a PEG ratio of 3.31. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NVDA currently has a PEG ratio of 3.78.

Another notable valuation metric for STM is its P/B ratio of 2.50. 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, NVDA has a P/B of 12.13.

These metrics, and several others, help STM earn a Value grade of A, while NVDA has been given a Value grade of F.

STM has seen stronger estimate revision activity and sports more attractive valuation metrics than NVDA, so it seems like value investors will conclude that STM is the superior option right now.


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