Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Semiconductors industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Latest Semiconductors Stock News

Before choosing which top Semiconductors stock to buy, be sure to conduct proper due diligence: analyze various financial metrics and look at historical data, public statements and news coverage.

There is a positive fundamental outlook for the semiconductors sub-industry over the next twelve months. The industry is poised to continue growing due to the mainstream adoption of Internet of Things (IoT), 5G and the automotive sector’s increasing demand for semiconductors. According to a survey conducted in the fourth quarter of 2020 with 156 senior executives from global semiconductor companies, 79% are predicting an industry-wide increase in profitability in 2021 with 73% planning to increase capital spending and 71% planning to spend more on research & development. The industry is dealing with supply constraints more severe than any we have seen in the last 20 years, largely reflecting the sharper than expected recovery in demand as consumers appear well-positioned to spend. Specifically, the automotive space was caught flat-footed as demand was already weak entering the pandemic and digested inventories amid the downturn while factories were shut down. As demand recovered, the entire industry rushed to place orders. However, with demand already booming in other end markets, such as data centers/notebooks and automotive, historically not being a key area of growth for chipmakers, these customers were put on the back burner. Due to these constraints, both the Chinese and U.S. governments are looking to build capacity within their home territory to better manage supply chains and prioritize national security. There is possible industry growth of 15% in 2021 and 6% in 2022, after a 7% rise in 2020. We see cloud/enterprise investments remaining healthy and they should benefit from new server cycles that began in the second quarter.

Why Focus on Undervalued Semiconductors Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Semiconductors Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Semiconductors industry for Monday, November 27, 2023. Let’s take a closer look at their individual scores to see how they measure up against each other and the Semiconductors industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

SigmaTron International Inc’s Value Grade

Value Grade:

SigmaTron International, Inc. is a provider of electronic manufacturing service (EMS), which includes printed circuit board assemblies, electro-mechanical subassemblies and completely assembled (box-build) electronic products. The Company provides services to its customers, including automatic and manual assembly and testing of products; material sourcing and procurement; manufacturing and test engineering support; design services; warehousing and distribution services; assistance in obtaining product approval from governmental and other regulatory bodies, and compliance reporting. The Company’s customers are in the industrial electronics, consumer electronics and medical/life sciences industries. It also provides a range of electronic and electromechanical manufacturing related outsourcing solutions for its customers. The Company provides these manufacturing services through an international network of facilities located in the United States, Mexico, China, Vietnam and Taiwan.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SigmaTron International Inc has a Value Score of 91, which is considered to be undervalued.

When you look at SigmaTron International Inc’s price-to-sales ratio at 0.05 compared to the industry median at 3.45, this company has a lower price relative to revenue compared to its peers. This could make SigmaTron International Inc’s stock more attractive for value investors.

SigmaTron International Inc’s price-earnings ratio is 1.62 compared to the industry median at 19.76. This means it has a lower share price relative to earnings compared to its peers. This could make SigmaTron International Inc more attractive for value investors.

Now, let’s assess SigmaTron International Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 4.0, when compared to the industry median of 15.3, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. SigmaTron International Inc’s shareholder yield is higher than its industry median ratio of (0.70%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. SigmaTron International Inc’s price-to-book ratio is lower than its industry median ratio of 2.81. This could make SigmaTron International Inc more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at SigmaTron International Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. SigmaTron International Inc’s price-to-free-cash-flow ratio is higher than its industry median ratio of 27.66. This could make SigmaTron International Inc less attractive because the higher P/FCF ratio indicates that SigmaTron International Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Silicon Motion Technology Corp. (ADR)’s Value Grade

Value Grade:

SILICON MOTION TECHNOLOGY CORPORATION is a provider of negative-AND (NAND) flash controllers for Solid State Drives (SSDs) and other solid state storage devices. The Company is mainly engaged in the design, development and sale of low-power semiconductor solutions for original equipment manufacturers (OEMs) and other customers in the mobile storage market. The Company is mainly engaged in the development of NAND flash controller integrated circuits (ICs) for solid-state storage devices, as well as specialty radio frequency (RF) ICs for mobile devices. In the mobile storage market, the Company's products are controllers used in SSDs, Embedded Multimedia Cards (eMMCs) and other embedded storage products, as well as flash memory cards, universal serial bus (USB) flash drives and other expandable storage products. The Company's products are used in smartphones, tablets, personal computers (PCs) and other devices.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Silicon Motion Technology Corp. (ADR) has a Value Score of 97, which is considered to be undervalued.

Silicon Motion Technology Corp. (ADR)’s price-earnings ratio is 12.9 compared to the industry median at 19.8. This means that it has a lower price relative to its earnings compared to its peers. This makes Silicon Motion Technology Corp. (ADR) more attractive for value investors.

Silicon Motion Technology Corp. (ADR)’s price-to-book ratio is higher than its peers. This could make Silicon Motion Technology Corp. (ADR) less attractive for value investors when compared to the industry median at 2.81.

You can read more about Silicon Motion Technology Corp. (ADR)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

SmartKem Inc’s Value Grade

Value Grade:

SmartKem, Inc. focuses on the development of materials and processes used to make organic thin-film transistors (OTFTs) for the manufacture of flexible electronics. The Company is engaged in seeking to reshape electronics with a revolutionary semiconductor platform that enables the next generation of low-cost displays and sensors. Its TRUFLEX technology is a full transistor stack design and process platform that produces transistors that are flexible, bendable, wearable, and lightweight. The Company?s patented TRUFLEX inks are solution deposited at a low temperature, on low-cost substrates to make organic thin-film transistor circuits. Its semiconductor platform can be used in a number of applications including mini-LED displays, AMOLED displays, fingerprint sensors, and logic circuits. TRUFLEX can be optimized for all voltage or current driven front-plane technologies. The Company develops its materials at its research and development facility in Manchester, United Kingdom.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

SmartKem Inc has a Value Score of 65, which is considered to be undervalued.

SmartKem Inc’s price-to-book ratio is higher than its peers. This could make SmartKem Inc less attractive for value investors when compared to the industry median at 2.81.

You can read more about SmartKem Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Semiconductors Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Semiconductors stocks as well as other industrys.

Choosing Which of the 3 Best Semiconductors Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• SigmaTron International Inc stock has a Value Grade of A.
• Silicon Motion Technology Corp. (ADR) stock has a Value Grade of A.
• SmartKem Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Semiconductors industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Semiconductors Stocks

Want to learn more about Semiconductors stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Semiconductors Stocks for Monday, November 27
• 3 Undervalued Semiconductors Stocks for Friday, November 24
• Why Intchains Group Ltd (ADR)’s (ICG) Stock Is Down 5.66%
• Why Skywater Technology Inc’s (SKYT) Stock Is Up 4.24%

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