Investors looking for stocks in the Electronics - Manufacturing Machinery sector might want to consider either Ultra Clean Holdings (UCTT) or Cohu (COHU). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, Ultra Clean Holdings is sporting a Zacks Rank of #2 (Buy), while Cohu has a Zacks Rank of #4 (Sell). This means that UCTT's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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 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.
UCTT currently has a forward P/E ratio of 14.01, while COHU has a forward P/E of 23.28. We also note that UCTT has a PEG ratio of 1. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. COHU currently has a PEG ratio of 2.33.
Another notable valuation metric for UCTT is its P/B ratio of 1.05. 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, COHU has a P/B of 1.10.
These metrics, and several others, help UCTT earn a Value grade of A, while COHU has been given a Value grade of D.
UCTT 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 UCTT is likely the superior value option right now.
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Ultra Clean Holdings, Inc. (UCTT) : Free Stock Analysis Report
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