Investors interested in Electronics - Testing Equipment stocks are likely familiar with Teradyne (TER) and Agilent Technologies (A). 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.
Both Teradyne and Agilent Technologies have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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.
TER currently has a forward P/E ratio of 19.64, while A has a forward P/E of 24.69. We also note that TER has a PEG ratio of 1.67. 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. A currently has a PEG ratio of 2.30.
Another notable valuation metric for TER is its P/B ratio of 4.59. 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, A has a P/B of 4.67.
These are just a few of the metrics contributing to TER's Value grade of B and A's Value grade of D.
Both TER and An are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TER is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Teradyne, Inc. (TER): Free Stock Analysis Report Agilent Technologies, Inc. (A): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research