Investors looking for stocks in the Wireless Equipment sector might want to consider either Ericsson (ERIC) or Motorola (MSI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. 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, both Ericsson and Motorola are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
ERIC currently has a forward P/E ratio of 13.40, while MSI has a forward P/E of 29.24. We also note that ERIC has a PEG ratio of 1.59. 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. MSI currently has a PEG ratio of 3.20.
Another notable valuation metric for ERIC is its P/B ratio of 2.95. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, MSI has a P/B of 36.78.
Based on these metrics and many more, ERIC holds a Value grade of A, while MSI has a Value grade of D.
Both ERIC and MSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ERIC is the superior value option right now.
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Today, See These 5 Potential Home Runs >>Ericsson (ERIC) : Free Stock Analysis Report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
