Investors interested in stocks from the Electronics - Miscellaneous Products sector have probably already heard of Flex (FLEX) and Garmin (GRMN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Flex has a Zacks Rank of #2 (Buy), while Garmin has a Zacks Rank of #3 (Hold) right now. This means that FLEX'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 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.
FLEX currently has a forward P/E ratio of 15.61, while GRMN has a forward P/E of 24.75. We also note that FLEX has a PEG ratio of 1.50. 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. GRMN currently has a PEG ratio of 2.22.
Another notable valuation metric for FLEX is its P/B ratio of 3.47. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, GRMN has a P/B of 4.66.
Based on these metrics and many more, FLEX holds a Value grade of A, while GRMN has a Value grade of C.
FLEX sticks out from GRMN in both our Zacks Rank and Style Scores models, so value investors will likely feel that FLEX is the better option right now.
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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.
