Investors interested in stocks from the Computer – Peripheral Equipment sector have probably already heard of LG Display (LPL) and Immersion (IMMR). But which of these two stocks presents investors with the better value opportunity right now? Let’s take a closer look.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
LG Display has a Zacks Rank of #2 (Buy), while Immersion has a Zacks Rank of #3 (Hold) right now. This means that LPL’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 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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
LPL currently has a forward P/E ratio of 7.01, while IMMR has a forward P/E of 15.82. We also note that LPL has a PEG ratio of 0.15. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock’s expected earnings growth rate. IMMR currently has a PEG ratio of 1.05.
Another notable valuation metric for LPL is its P/B ratio of 0.68. 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, IMMR has a P/B of 4.81.
These metrics, and several others, help LPL earn a Value grade of A, while IMMR has been given a Value grade of D.
LPL has seen stronger estimate revision activity and sports more attractive valuation metrics than IMMR, so it seems like value investors will conclude that LPL is the superior option right now.
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