Investors interested in stocks from the Wireless Equipment sector have probably already heard of Ericsson (ERIC) and Qualcomm (QCOM). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both Ericsson and Qualcomm have a Zacks Rank of # 2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
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 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.
ERIC currently has a forward P/E ratio of 19.82, while QCOM has a forward P/E of 28.33. We also note that ERIC has a PEG ratio of 0.75. 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. QCOM currently has a PEG ratio of 1.43.
Another notable valuation metric for ERIC is its P/B ratio of 4.58. 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, QCOM has a P/B of 37.78.
These are just a few of the metrics contributing to ERIC's Value grade of B and QCOM's Value grade of C.
Both ERIC and QCOM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ERIC is the superior value option right now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ericsson (ERIC) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research