Investors with an interest in Wireless Equipment stocks have likely encountered both Qualcomm (QCOM) and Motorola (MSI). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both Qualcomm and Motorola are holding a Zacks Rank of # 2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. 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.
QCOM currently has a forward P/E ratio of 14.79, while MSI has a forward P/E of 32.84. We also note that QCOM has a PEG ratio of 1.61. 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. MSI currently has a PEG ratio of 3.25.
Another notable valuation metric for QCOM is its P/B ratio of 6.94. 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, MSI has a P/B of 59.63.
Based on these metrics and many more, QCOM holds a Value grade of B, while MSI has a Value grade of D.
Both QCOM and MSI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that QCOM is the superior value option right now.
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QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
