Micron Technology, Inc. MU has been one of the most consistent performers in the semiconductor industry. Shares of this Zacks Rank #2 (Buy) company have surged almost 42.1% on a year-to-date basis driven by robust revenue growth.
Over the past one year, the stock has gained approximately 46.56%, in-line with the Zacks Electronics-Semiconductor industry’s return.
MU – A Great Choice for Value Investors
Micron offers both DRAM and NAND products. While DRAM chips are the key components in PCs, NAND flash chips are crucial for portable electronic devices. The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and strong fundamentals.
The stock has grabbed attention with striking performances on the back of solid earnings results and strong growth projections. Though the company reported non-GAAP loss per share in fourth-quarter fiscal 2016, it was narrower than the year-ago quarter as well as the Zacks Consensus Estimate.
However, the company’s fourth-quarter revenues came ahead of the Zacks Consensus Estimate and marked 11% growth on a year-over-year basis. The company attributed the strength in the quarterly to pricing improvement in the DRAM memory chip market and recovery in the PC market.
Notably, the company recently raised its guidance for the first quarter of fiscal 2017. The optimism is driven by improvement in average selling prices (ASP), particularly for DRAM. Apart from this, the company also revealed that its overall demand continues to be healthy, while it forecasts a slow industry supply growth for the next few quarters.
It should be noted that the company currently trades at a forward P/E multiple of 13.8x, which is significantly lower than the Zacks categorized Electronics-Semiconductor industry average of 17.3x. The ratio, which is obtained by dividing a stock’s current market price with its historical or estimated earnings, measures how much an investor needs to shell out per dollar of earnings. Therefore, lower the P/E of a stock, the better for a value investor.
Hence, we believe that there is still much momentum left in this Zacks Rank #2 (Buy) stock, which is quite evident from its VGM Score of “B” and fiscal 2017 and 2018 earnings growth rate of 2400% and 35.2%, respectively.
4 Value Picks
Using our new style score system, we have honed in on three more stocks that are likely to ride the semiconductor sector growth and are currently trading at attractive valuations — thus serving the perfect opportunity for investors to jump in and ride the growth bandwagon.
Our Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount. Back-tested results show that stocks with a Value Grade of ‘A’ when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) handily beat other stocks.
Flaunting a solid Zacks Rank and Value Style Score, these stocks are great value bets for the generally richly valued semiconductor space. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lam Research LRCX: Established in 1980 and headquartered in Fremont, CA, Lam Research Corporation supplies wafer fabrication equipment and services to the semiconductor industry. Its products are used by semiconductor manufacturers in front-end and WLP processes, creating memory, microprocessors, and other logic integrated circuits for a broad range of electronic devices.
The EPS estimate for the current year surged 18.3% ($1.27) to $8.18 per share over the last 60 days.
This Zacks Rank #2 company carries a Value Grade of ‘A.’ It is currently trading at a relatively cheap P/E of 16.3x, lower than the sub-industry average of 23.1x. It has a long-term growth rate of 11.6% and has increased almost 31.02% on a year-to-date basis.
Skyworks Solutions, Inc. SWKS: Headquartered in Woburn, Skyworks Solutions designs, manufactures, and markets a broad range of high performance analog and mixed signal semiconductors that enable wireless connectivity. The company’s products include power amplifiers (PAs), front-end modules (FEMs), radio frequency (RF) sub-systems and cellular systems.
Over the last 60 days, its fiscal 2017 EPS estimates rose 0.7% (4 cents) to $5.76 cents per share.
This Zacks Rank #2 company sports a Value Grade of ‘A.’ It is currently trading at a relatively cheap P/E of 13.2x, lower than the sub-industry average of 13.8x. It has a long-term growth rate of 17.1% and has increased almost 31.02% on a year-to-date basis.
Juniper Networks, Inc. JNPR: This is a leading provider of networking solutions and communication devices. The company develops, designs and sells products that help to build network infrastructure used for services and applications based on a single Internet protocol network worldwide. The company caters to the networking needs of enterprises and public sector organizations and service providers across the globe. Hence, the two primary markets for its networking products and services happen to be Enterprise and Service Provider.
The current year EPS estimate increased 7.8% (26 cents) to $1.65 over the last 60 days.
The stock carries a Zacks Rank #2 and has a Value Grade of ‘A.’ The company is currently trading at a relatively cheap P/E of 17.0x, lower than the sub-industry average of 18.8x. It has a long-term growth rate of 9.5% and has climbed almost 3.66% on a year-to-date basis.
Zacks' Best Investment Ideas for Long-Term Profit
Today you can gain access to long-term trades with double and triple-digit profit potential rarely available to the public. Starting now, you can look inside our stocks under $10, home run and value stock portfolios, plus more. Want a peek at this private information? Click here >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
SKYWORKS SOLUTN (SWKS): Free Stock Analysis Report
JUNIPER NETWRKS (JNPR): Free Stock Analysis Report
MICRON TECH (MU): Free Stock Analysis Report
LAM RESEARCH (LRCX): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research