UMC or LSCC: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Electronics - Semiconductors sector have probably already heard of United Microelectronics Corporation (UMC) and Lattice Semiconductor (LSCC). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Right now, United Microelectronics Corporation is sporting a Zacks Rank of #2 (Buy), while Lattice Semiconductor has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that UMC likely has seen a stronger improvement to its earnings outlook than LSCC has recently. However, value investors will care about much more than just this.

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.

UMC currently has a forward P/E ratio of 15.49, while LSCC has a forward P/E of 53.64. We also note that UMC has a PEG ratio of 0.45. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. LSCC currently has a PEG ratio of 0.91.

Another notable valuation metric for UMC is its P/B ratio of 3.41. 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, LSCC has a P/B of 19.86.

These are just a few of the metrics contributing to UMC's Value grade of B and LSCC's Value grade of F.

UMC is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that UMC is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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