HPE or SIMO: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Computer - Integrated Systems sector have probably already heard of Hewlett Packard Enterprise (HPE) and Silicon Motion (SIMO). 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.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, both Hewlett Packard Enterprise and Silicon Motion are holding a Zacks Rank of #1 (Strong Buy). Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.

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.

HPE currently has a forward P/E ratio of 13.83, while SIMO has a forward P/E of 28.47. We also note that HPE has a PEG ratio of 0.43. 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. SIMO currently has a PEG ratio of 0.53.

Another notable valuation metric for HPE is its P/B ratio of 2.46. 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, SIMO has a P/B of 9.57.

These are just a few of the metrics contributing to HPE's Value grade of B and SIMO's Value grade of F.

Both HPE and SIMO are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that HPE is the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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