MU vs. AMD: Which Stock Is the Better Value Option?

Investors interested in Computer - Integrated Systems stocks are likely familiar with Micron (MU) and Advanced Micro Devices (AMD). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, Micron is sporting a Zacks Rank of #1 (Strong Buy), while Advanced Micro Devices has a Zacks Rank of #3 (Hold). This means that MU's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.

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.

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.

MU currently has a forward P/E ratio of 4.82, while AMD has a forward P/E of 67.28. We also note that MU has a PEG ratio of 0.15. 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. AMD currently has a PEG ratio of 4.49.

Another notable valuation metric for MU is its P/B ratio of 6.99. 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, AMD has a P/B of 12.34.

These metrics, and several others, help MU earn a Value grade of B, while AMD has been given a Value grade of F.

MU has seen stronger estimate revision activity and sports more attractive valuation metrics than AMD, so it seems like value investors will conclude that MU is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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