STM vs. TXN: Which Stock Is the Better Value Option?

·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 is more attractive to value investors? We'll need to take a closer look to find out.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Right now, STMicroelectronics is sporting a Zacks Rank of #1 (Strong Buy), while Texas Instruments has a Zacks Rank of #3 (Hold). 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 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.

STM currently has a forward P/E ratio of 9.16, while TXN has a forward P/E of 17.76. We also note that STM has a PEG ratio of 1.83. 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 1.90.

Another notable valuation metric for STM is its P/B ratio of 3.16. 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 10.77.

These metrics, and several others, help STM earn a Value grade of B, while TXN has been given 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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