Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of Silicon Motion (SIMO) 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 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.
Silicon Motion and Ambarella are both sporting a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle 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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SIMO currently has a forward P/E ratio of 17.68, while AMBA has a forward P/E of 103.76. We also note that SIMO has a PEG ratio of 3.54. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. AMBA currently has a PEG ratio of 9.28.
Another notable valuation metric for SIMO is its P/B ratio of 2.38. 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 3.96.
These are just a few of the metrics contributing to SIMO's Value grade of B and AMBA's Value grade of F.
Both SIMO and AMBA are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SIMO is the superior value option right now.
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Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
Ambarella, Inc. (AMBA) : Free Stock Analysis Report
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