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XCRA vs. STM: Which Stock Is the Better Value Option?


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Investors with an interest in Semiconductor - General stocks have likely encountered both Xcerra (XCRA) and STMicroelectronics (STM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Xcerra has a Zacks Rank of #2 (Buy), while STMicroelectronics has a Zacks Rank of #3 (Hold). This means that XCRA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

XCRA currently has a forward P/E ratio of 13.45, while STM has a forward P/E of 17.22. We also note that XCRA has a PEG ratio of 1.12. 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. STM currently has a PEG ratio of 3.44.

Another notable valuation metric for XCRA is its P/B ratio of 2.18. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, STM has a P/B of 3.69.

These metrics, and several others, help XCRA earn a Value grade of A, while STM has been given a Value grade of D.

XCRA sticks out from STM in both our Zacks Rank and Style Scores models, so value investors will likely feel that XCRA is the better 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: XCRA , STM


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