STM vs. TXN: Which Stock Is the Better Value Option?
Investors interested in Semiconductor - General stocks are likely familiar with STMicroelectronics (STM) and Texas Instruments (TXN). 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.
STMicroelectronics has a Zacks Rank of #2 (Buy), while Texas Instruments has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that STM likely has seen a stronger improvement to its earnings outlook than TXN has recently. 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.
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.
STM currently has a forward P/E ratio of 12.22, while TXN has a forward P/E of 23.57. We also note that STM has a PEG ratio of 2.44. 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. TXN currently has a PEG ratio of 2.53.
Another notable valuation metric for STM is its P/B ratio of 3.52. 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, TXN has a P/B of 11.03.
These metrics, and several others, help STM earn a Value grade of B, while TXN has been given a Value grade of D.
STM 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 STM is likely the superior value option right now.
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STMicroelectronics N.V. (STM) : Free Stock Analysis Report
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
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