Investors interested in stocks from the Wireless Equipment sector have probably already heard of InterDigital (IDCC) and Qualcomm (QCOM). 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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
InterDigital and Qualcomm 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 IDCC is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture 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.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
IDCC currently has a forward P/E ratio of 11.23, while QCOM has a forward P/E of 13.92. We also note that IDCC has a PEG ratio of 0.64. 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. QCOM currently has a PEG ratio of 1.11.
Another notable valuation metric for IDCC is its P/B ratio of 4.50. 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, QCOM has a P/B of 6.53.
Based on these metrics and many more, IDCC holds a Value grade of B, while QCOM has a Value grade of C.
IDCC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that IDCC is likely the superior value option right now.
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Free: See Our Top Stock And 4 Runners UpInterDigital, Inc. (IDCC) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : 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.
