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MACOM Technology Solutions Holdings, Inc. (MTSI) - free report >>
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MACOM Technology Solutions Holdings, Inc. (MTSI) - free report >>
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ON vs. MTSI: Which Stock Is the Better Value Option?
Investors interested in Semiconductor - Analog and Mixed stocks are likely familiar with ON Semiconductor Corp. (ON - Free Report) and M/A-Com (MTSI - 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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Both ON Semiconductor Corp. and M/A-Com have a Zacks Rank of # 2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks 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.
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.
ON currently has a forward P/E ratio of 14.23, while MTSI has a forward P/E of 21.86. We also note that ON has a PEG ratio of 0.56. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MTSI currently has a PEG ratio of 1.35.
Another notable valuation metric for ON is its P/B ratio of 5.87. 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, MTSI has a P/B of 7.21.
These metrics, and several others, help ON earn a Value grade of B, while MTSI has been given a Value grade of C.
Both ON and MTSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that ON is the superior value option right now.