Investors with an interest in Computer- Storage Devices stocks have likely encountered both Super Micro Computer (SMCI) and NetApp (NTAP). 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.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Super Micro Computer and NetApp are holding a Zacks Rank of #1 (Strong Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle 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.
SMCI currently has a forward P/E ratio of 8.44, while NTAP has a forward P/E of 18.27. We also note that SMCI has a PEG ratio of 0.64. 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. NTAP currently has a PEG ratio of 1.64.
Another notable valuation metric for SMCI is its P/B ratio of 2.19. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NTAP has a P/B of 24.12.
Based on these metrics and many more, SMCI holds a Value grade of B, while NTAP has a Value grade of D.
Both SMCI and NTAP are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SMCI is the superior value option right now.
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Super Micro Computer, Inc. (SMCI): Free Stock Analysis Report
NetApp, Inc. (NTAP): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).