Investors with an interest in Electronics - Miscellaneous Components stocks have likely encountered both Fabrinet (FN) and TE Connectivity (TEL). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Fabrinet and TE Connectivity are sporting Zacks Ranks of #1 (Strong Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that FN is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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.
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.
FN currently has a forward P/E ratio of 14.10, while TEL has a forward P/E of 14.68. We also note that FN has a PEG ratio of 1.08. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. TEL currently has a PEG ratio of 1.37.
Another notable valuation metric for FN is its P/B ratio of 2.41. 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, TEL has a P/B of 2.65.
These are just a few of the metrics contributing to FN's Value grade of B and TEL's Value grade of C.
FN sticks out from TEL in both our Zacks Rank and Style Scores models, so value investors will likely feel that FN is the better option right now.
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Fabrinet (FN): Free Stock Analysis Report
TE Connectivity Ltd. (TEL): Free Stock Analysis Report
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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.