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STM vs. NVDA: Which Stock Should Value Investors Buy Now?


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Investors interested in Semiconductor - General stocks are likely familiar with STMicroelectronics (STM) and Nvidia (NVDA). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 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.

STMicroelectronics has a Zacks Rank of #2 (Buy), while Nvidia has a Zacks Rank of #3 (Hold) right now. This means that STM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

STM currently has a forward P/E ratio of 13.86, while NVDA has a forward P/E of 34.99. We also note that STM has a PEG ratio of 2.77. 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. NVDA currently has a PEG ratio of 3.28.

Another notable valuation metric for STM is its P/B ratio of 3.03. 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, NVDA has a P/B of 19.25.

These are just a few of the metrics contributing to STM's Value grade of B and NVDA's Value grade of F.

STM stands above NVDA thanks to its solid earnings outlook, and based on these valuation figures, we also feel that STM is the superior value option right now.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: STM , NVDA



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