TEL vs. NJDCY: Which Stock Is the Better Value Option?
Investors interested in stocks from the Electronics - Miscellaneous Components sector have probably already heard of TE Connectivity (TEL) and Nidec Corp. (NJDCY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, TE Connectivity is sporting a Zacks Rank of #2 (Buy), while Nidec Corp. has a Zacks Rank of #3 (Hold). This means that TEL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
TEL currently has a forward P/E ratio of 23.02, while NJDCY has a forward P/E of 44.74. We also note that TEL has a PEG ratio of 2.21. 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. NJDCY currently has a PEG ratio of 4.12.
Another notable valuation metric for TEL is its P/B ratio of 3.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NJDCY has a P/B of 4.27.
Based on these metrics and many more, TEL holds a Value grade of A, while NJDCY has a Value grade of C.
TEL 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 TEL is likely the superior value option right now.
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