Investors interested in Electronics - Miscellaneous Products stocks are likely familiar with Daktronics (DAKT) and Garmin (GRMN). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 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.
Daktronics has a Zacks Rank of #2 (Buy), while Garmin has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DAKT is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
DAKT currently has a forward P/E ratio of 16.40, while GRMN has a forward P/E of 25.32. We also note that DAKT has a PEG ratio of 0.66. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. GRMN currently has a PEG ratio of 2.85.
Another notable valuation metric for DAKT is its P/B ratio of 3.19. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GRMN has a P/B of 5.02.
These metrics, and several others, help DAKT earn a Value grade of B, while GRMN has been given a Value grade of D.
DAKT stands above GRMN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DAKT is the superior value option right now.
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Daktronics, Inc. (DAKT): Free Stock Analysis Report
Garmin Ltd. (GRMN): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).