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TER vs. A: Which Stock Is the Better Value Option?


Investors interested in Electronics – Testing Equipment stocks are likely familiar with Teradyne (TER) and Agilent Technologies (A). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Teradyne and Agilent Technologies are both sporting a Zacks Rank of # 2 (Buy) right now. 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

TER currently has a forward P/E ratio of 16.73, while A has a forward P/E of 25.91. We also note that TER has a PEG ratio of 1.27. 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. A currently has a PEG ratio of 2.41.

Another notable valuation metric for TER is its P/B ratio of 3.92. The P/B ratio pits a stock’s market value against its book value, which is defined as total assets minus total liabilities. For comparison, A has a P/B of 4.91.

These are just a few of the metrics contributing to TER’s Value grade of A and A’s Value grade of D.

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

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