Investors interested in stocks from the Electronics - Miscellaneous Components sector have probably already heard of TDK Corp. (TTDKY) and OSI Systems (OSIS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 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.
TDK Corp. has a Zacks Rank of #2 (Buy), while OSI Systems has a Zacks Rank of #3 (Hold) right now. Investors should feel comfortable knowing that TTDKY likely has seen a stronger improvement to its earnings outlook than OSIS has recently. 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 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.
TTDKY currently has a forward P/E ratio of 15.48, while OSIS has a forward P/E of 24.63. We also note that TTDKY has a PEG ratio of 0.90. 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. OSIS currently has a PEG ratio of 2.09.
Another notable valuation metric for TTDKY is its P/B ratio of 1.6. 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, OSIS has a P/B of 4.38.
These are just a few of the metrics contributing to TTDKY's Value grade of A and OSIS's Value grade of C.
TTDKY has seen stronger estimate revision activity and sports more attractive valuation metrics than OSIS, so it seems like value investors will conclude that TTDKY is the superior 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.
