MG vs. KLAC: Which Stock Should Value Investors Buy Now?

Investors interested in Electronics - Miscellaneous Products stocks are likely familiar with Mistras (MG) and KLA (KLAC). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Both Mistras and KLA have a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is only part of the picture for value investors.

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.

Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.

MG currently has a forward P/E ratio of 16.46, while KLAC has a forward P/E of 38.38. We also note that MG has a PEG ratio of 1.03. 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. KLAC currently has a PEG ratio of 1.60.

Another notable valuation metric for MG is its P/B ratio of 2.38. 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, KLAC has a P/B of 42.84.

These are just a few of the metrics contributing to MG's Value grade of A and KLAC's Value grade of D.

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

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

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