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

Zacks Equity Research
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Investors looking for stocks in the Semiconductor - General sector might want to consider either Intel (INTC) or STMicroelectronics (STM). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Both Intel and STMicroelectronics have a Zacks Rank of # 2 (Buy) right now. 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 factor that value investors are interested in.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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.

INTC currently has a forward P/E ratio of 12.20, while STM has a forward P/E of 21.14. We also note that INTC has a PEG ratio of 1.63. 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. STM currently has a PEG ratio of 4.23.

Another notable valuation metric for INTC is its P/B ratio of 3.03. 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, STM has a P/B of 4.13.

Based on these metrics and many more, INTC holds a Value grade of A, while STM has a Value grade of C.

Both INTC and STM are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that INTC is the superior value option right now.


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