Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of United Microelectronics Corporation (UMC) and Lattice Semiconductor (LSCC). 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.
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, United Microelectronics Corporation is sporting a Zacks Rank of #1 (Strong Buy), while Lattice Semiconductor has a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that UMC has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
UMC currently has a forward P/E ratio of 15.47, while LSCC has a forward P/E of 69.50. We also note that UMC has a PEG ratio of 0.45. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. LSCC currently has a PEG ratio of 1.75.
Another notable valuation metric for UMC is its P/B ratio of 3.4. 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, LSCC has a P/B of 22.98.
Based on these metrics and many more, UMC holds a Value grade of B, while LSCC has a Value grade of F.
UMC has seen stronger estimate revision activity and sports more attractive valuation metrics than LSCC, so it seems like value investors will conclude that UMC is the superior option right now.
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United Microelectronics Corporation (UMC): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).