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STM or TXN: Which Is the Better Value Stock Right Now?

Zacks Equity Research
·2 min read

Investors looking for stocks in the Semiconductor - General sector might want to consider either STMicroelectronics (STM) or Texas Instruments (TXN). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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.

STMicroelectronics has a Zacks Rank of #2 (Buy), while Texas Instruments has a Zacks Rank of #3 (Hold) right now. This means that STM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

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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.

STM currently has a forward P/E ratio of 9.58, while TXN has a forward P/E of 18.89. We also note that STM has a PEG ratio of 1.92. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. TXN currently has a PEG ratio of 2.02.

Another notable valuation metric for STM is its P/B ratio of 3.17. 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, TXN has a P/B of 10.96.

Based on these metrics and many more, STM holds a Value grade of A, while TXN has a Value grade of C.

STM sticks out from TXN in both our Zacks Rank and Style Scores models, so value investors will likely feel that STM is the better option right now.


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STMicroelectronics N.V. (STM) : Free Stock Analysis Report
 
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
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Zacks Investment Research