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STM vs. TXN: Which Stock Should Value Investors Buy Now?

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Investors interested in Semiconductor - General stocks are likely familiar with STMicroelectronics (STM - Free Report) and Texas Instruments (TXN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

STMicroelectronics and Texas Instruments are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that STM is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their 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 8.87, while TXN has a forward P/E of 17.12. We also note that STM has a PEG ratio of 1.77. 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 1.83.

Another notable valuation metric for STM is its P/B ratio of 2.73. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, TXN has a P/B of 9.81.

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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