Investors interested in stocks from the Electronics - Miscellaneous Components sector have probably already heard of CTS (CTS) and OSI Systems (OSIS). 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.
Right now, CTS is sporting a Zacks Rank of #2 (Buy), while OSI Systems has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CTS has an improving earnings outlook. However, value investors will care about much more than just this.
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 19.16, while OSIS has a forward P/E of 26.25. We also note that CTS has a PEG ratio of 1.20. 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. OSIS currently has a PEG ratio of 2.24.
Another notable valuation metric for CTS is its P/B ratio of 2.43. 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, OSIS has a P/B of 5.35.
These metrics, and several others, help CTS earn a Value grade of B, while OSIS has been given a Value grade of D.
CTS has seen stronger estimate revision activity and sports more attractive valuation metrics than OSIS, so it seems like value investors will conclude that CTS is the superior option right now.
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CTS Corporation (CTS): Free Stock Analysis Report
OSI Systems, Inc. (OSIS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).