Investors looking for stocks in the Electronics - Miscellaneous Components sector might want to consider either TDK Corp. (TTDKY) or TE Connectivity (TEL). 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 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.
Currently, both TDK Corp. and TE Connectivity are holding a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
TTDKY currently has a forward P/E ratio of 18.23, while TEL has a forward P/E of 18.59. We also note that TTDKY has a PEG ratio of 1.32. 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. TEL currently has a PEG ratio of 1.55.
Another notable valuation metric for TTDKY is its P/B ratio of 1.83. 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, TEL has a P/B of 4.59.
Based on these metrics and many more, TTDKY holds a Value grade of B, while TEL has a Value grade of C.
Both TTDKY and TEL are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that TTDKY is the superior value option right now.
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TDK Corp. (TTDKY): Free Stock Analysis Report
TE Connectivity Ltd. (TEL): Free Stock Analysis Report