NXPI Vs. SLAB: Which Stock Should Value Investors Buy Now?
Zacks Investment Research | May 09, 2019 09:30PM ET
Investors looking for stocks in the Semiconductor - Analog and Mixed sector might want to consider either NXP Semiconductors (NXPI) or Silicon Laboratories (SLAB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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.
Currently, NXP Semiconductors has a Zacks Rank of #2 (Buy), while Silicon Laboratories has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that NXPI has an improving earnings outlook. 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.
NXPI currently has a forward P/E ratio of 12.83, while SLAB has a forward P/E of 33.18. We also note that NXPI has a PEG ratio of 1.03. 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. SLAB currently has a PEG ratio of 2.21.
Another notable valuation metric for NXPI is its P/B ratio of 3.32. 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, SLAB has a P/B of 4.18.
These metrics, and several others, help NXPI earn a Value grade of B, while SLAB has been given a Value grade of D.
NXPI has seen stronger estimate revision activity and sports more attractive valuation metrics than SLAB, so it seems like value investors will conclude that NXPI is the superior option right now.
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