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MARKETS LIVE BLOG:

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SIMO vs. AMBA: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
·2 min read

Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of Silicon Motion (SIMO) and Ambarella (AMBA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Silicon Motion has a Zacks Rank of #2 (Buy), while Ambarella has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SIMO is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

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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.

SIMO currently has a forward P/E ratio of 14.12, while AMBA has a forward P/E of 53.19. We also note that SIMO has a PEG ratio of 1.57. 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. AMBA currently has a PEG ratio of 6.32.

Another notable valuation metric for SIMO is its P/B ratio of 5.18. 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, AMBA has a P/B of 5.99.

These are just a few of the metrics contributing to SIMO's Value grade of B and AMBA's Value grade of F.

SIMO 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 SIMO is likely the superior value option right now.


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Silicon Motion Technology Corporation (SIMO) : Free Stock Analysis Report
 
Ambarella, Inc. (AMBA) : Free Stock Analysis Report
 
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