During periods of uncertainty, investors often look for what they find to be value. It should go without saying that an already-slowing international economic picture and then the Brexit shock have added to uncertainty ahead. Value stocks have historically offered investors some cushion against the market gyrations. Still, there is no free lunch – and value stocks almost always trade as value for a reason.
24/7 Wall St. has decided to screen up and down the value universe in the land of technology. Most of these are tied to semiconductors, circuits and networking. The idea here was to look forward to the future 2017 earnings expectations now that 2016 is incredibly half way over.
As far as the screening criteria we have evaluated, it was companies in the mid-cap and large-cap space with a minimum market value of $2 billion. We then looked for companies valued at less than 10-times next year’s consensus earnings per share. A price-to-book value was also considered to make sure that “value” can be evaluated as value, but investors should know that book value is often rather variable from company to company and may not capture the true value of a business. Also included were performance metrics, relative price data versus analyst targets and color on each.
Be advised that just because companies are expected to hit earnings metrics does not mean that they always do. In fact, some of these companies have continually had issues – which may explain why they screen as value rather than growth. Investors also need to know that value does not always identify itself in the same metrics from company to company.
Two final warnings — We also just ended the second quarter, so some of the underlying metrics showing value could have changed. and remember, value stocks are often nothing more than value traps!
ARRIS International PLC (NASDAQ: ARRS) is valued at only 6.7 times expected earnings and has a market cap of $3.9 billion. ARRIS shares are down 33% year to date, ditto versus a year ago, ARRIS is valued at 1.4 times its stated book value and 2016 was the high-growth year on revenues. Shares of ARRIS recently traded at $20.58. The stock has a consensus analyst price target of $32.71 and a 52-week trading range of $20.05 to $32.93.
Brocade Communications Systems, Inc. (NASDAQ: BRCD) is one of those names that seems to always make a screen for value, and it has been a would-be rumor mill stock for years. Brocade is valued at almost 9 times expected earnings and is valued at less than 1.4 times book value. It has a market cap of $3.5 billion and its shares are down almost 3% year to date – but it’s down 24% versus a year ago. Brocade recently traded at $9.07, with a consensus analyst price target of $9.11 and a 52-week trading range of $7.40 to $12.07.
Fitbit Inc. (NYSE: FIT) is unusual because it is a recent IPO and the company is considered a one-hit wonder in wearable health and fitness monitoring. It is valued at 8.5 times expected earnings for next year, but has a trailing P/E that is well above 10 – so lots of continued growth is expected here. Fitbit and has a market cap of $2.6 billion and is valued at 2.6 times book value. The performance has been atrocious at -59% in 2016 and -64% over the last year. Fitbit shares last traded at $12.13, and it was just this week a member of the 52-week low club. The stock has a consensus analyst price target of $22.29 and a 52-week trading range of $11.65 to $51.90.
Juniper Networks, Inc. (NYSE: JNPR) has been troubled after earnings failed to meet expectations for the networking equipment outfit. Juniper is valued at 9.9 times next year’s earnings (13 times trailing) and has a market cap of $8.3 billion. It is also valued at 1.8 times book. Juniper shares are down 21% year to date and are down 16% versus a year ago. Juniper last traded at $22.07, with a consensus analyst price target of $26.50 and a 52-week trading range of $21.18 to $32.39.
Microsemi Corporation (NASDAQ: MSCC) has been growing sales and earnings but its stock is down 5% in 2016 and is down 12% versus a year ago. It is valued at 8.3 times expected earnings and has a market cap of $3.5 billion. It is also valued at 2.2 times its book value. Shares of Microsemi last traded at $31.36, with a consensus analyst price target of $45.50 and a 52-week trading range of $28.24 to $39.56.
NCR Corp. (NYSE: NCR) just feels like low-growth value trap on the surface more than a value stock, but the ATM, cash register and other services and products maker is valued at only 8 times expected earnings and has a market cap of $3.2 billion. NCR is bucking the common down-draft in 2016 with a year-to-date gain of more than 5%. Still, it is down 14% from a year ago. We would also point out that NCR was shown to be valued at more than 6-times its book value. NCR recently traded at $26.93. The stock has a consensus analyst price target of $30.50 and a 52-week trading range of $18.02 to $32.09.
ON Semiconductor Corp. (NASDAQ: ON) was last valued at 8.4 times next year’s earnings expectations and it has a $3..6 billion market cap. It is also valued at about 2.2 times book, and performance is id down 11.5% in 2016 and down 26% from a year ago. ON Semiconductor shares last traded at $8.69. The stock has a consensus analyst price target of $12.00 and a 52-week trading range of $6.97 to $11.86.
Skyworks Solutions Inc. (NASDAQ: SWKS) has a market cap of $11.5 billion and is valued at 9.75 times forward earnings. That being said, it is valued at less than 12 times trailing earnings and it is also valued at more than 3.2-times its book value. The chip-maker has had some of its fortunes tied to Apple and other chip hogs, which have all contributed to the gyrations here for its stock to have been sold off so much. This stock is down almost 21% from the end of 2015 and it is down 40% from this time a year ago. Skyworks recently traded at $61.73, with a consensus analyst price target of $83.22 and a 52-week trading range of $54.50 to $106.74.
*** Valuations and performance metrics were from Finviz and relative trading metrics and earnings expectations were from Thomson Reuters. Performance metrics and valuation metrics based upon June 29 closing prices and data was used from June 30.