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CMTL vs. IDCC: Which Stock Should Value Investors Buy Now?

Zacks Equity Research
Updated
Is (HRS) Outperforming Other Computer and Technology Stocks This Year?

Investors interested in stocks from the Wireless Equipment sector have probably already heard of Comtech Telecommunications (CMTL) and InterDigital (IDCC). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.

Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Comtech Telecommunications has a Zacks Rank of #1 (Strong Buy), while InterDigital has a Zacks Rank of #3 (Hold). This means that CMTL's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.

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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.

CMTL currently has a forward P/E ratio of 27.34, while IDCC has a forward P/E of 93.17. We also note that CMTL has a PEG ratio of 5.47. 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. IDCC currently has a PEG ratio of 6.21.

Another notable valuation metric for CMTL is its P/B ratio of 1.53. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, IDCC has a P/B of 2.81.

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

CMTL 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 CMTL is likely the superior value option right now.


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Comtech Telecommunications Corp. (CMTL) : Free Stock Analysis Report
 
InterDigital, Inc. (IDCC) : Free Stock Analysis Report
 
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