Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of Synaptics (SYNA) and Ambarella (AMBA). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Synaptics has a Zacks Rank of #2 (Buy), while Ambarella has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SYNA is likely seeing its earnings outlook improve to a greater extent. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
SYNA currently has a forward P/E ratio of 10.76, while AMBA has a forward P/E of 556.29. We also note that SYNA has a PEG ratio of 1.08. 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. AMBA currently has a PEG ratio of 39.
Another notable valuation metric for SYNA is its P/B ratio of 2.98. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, AMBA has a P/B of 3.68.
These are just a few of the metrics contributing to SYNA's Value grade of A and AMBA's Value grade of F.
SYNA has seen stronger estimate revision activity and sports more attractive valuation metrics than AMBA, so it seems like value investors will conclude that SYNA is the superior option right now.
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Synaptics Incorporated (SYNA) : Free Stock Analysis Report
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