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ON vs. SLAB: Which Stock Is the Better Value Option?

Investors looking for stocks in the Semiconductor - Analog and Mixed sector might want to consider either ON Semiconductor Corp. (ON) or Silicon Laboratories (SLAB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, ON Semiconductor Corp. is sporting a Zacks Rank of #2 (Buy), while Silicon Laboratories has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that ON likely has seen a stronger improvement to its earnings outlook than SLAB has recently. But this is just one factor that value investors are interested in.

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 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.

ON currently has a forward P/E ratio of 11.47, while SLAB has a forward P/E of 35.41. We also note that ON has a PEG ratio of 0.87. 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. SLAB currently has a PEG ratio of 2.36.

Another notable valuation metric for ON is its P/B ratio of 2.91. 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, SLAB has a P/B of 4.15.

These are just a few of the metrics contributing to ON's Value grade of A and SLAB's Value grade of D.

ON stands above SLAB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that ON is the superior value 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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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