Investors with an interest in Electronics - Miscellaneous Components stocks have likely encountered both CTS (CTS) and Littelfuse (LFUS). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
CTS and Littelfuse are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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 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.
CTS currently has a forward P/E ratio of 21.41, while LFUS has a forward P/E of 25.07. We also note that CTS has a PEG ratio of 1.34. 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. LFUS currently has a PEG ratio of 2.09.
Another notable valuation metric for CTS is its P/B ratio of 2.83. 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, LFUS has a P/B of 3.84.
Based on these metrics and many more, CTS holds a Value grade of B, while LFUS has a Value grade of C.
Both CTS and LFUS are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that CTS is the superior value option right now.
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CTS Corporation (CTS): Free Stock Analysis Report
Littelfuse, Inc. (LFUS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).