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.

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 Thursday, September 12, 2024. 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.

Himax Technologies Inc - ADR’s Value Grade

Value Grade:

Himax Technologies Inc is a Taiwan-based company mainly engaged in the fabless semiconductor solution. The Company offers comprehensive automotive integrated circuit (IC) solutions, including traditional driver ICs, in-cell touch and display driver integration, large touch and display driver integration and local dimming timing controllers. The Company's principal product lines include display drivers and timing controllers, touch controller ICs, thin film transistor liquid crystal display (TFT-LCD) television and monitor semiconductor solutions, intellectual property (IP) and application specific integrated circuit (ASIC) service, liquid crystal on silicon (LCOS) and micro-electro mechanical systems (MEMS) products, power ICs, complementary metal-oxide-semiconductor (CMOS) image sensor product, and wafer level optics products.

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.

Himax Technologies Inc - ADR has a Value Score of 73, which is considered to be undervalued.

When you look at Himax Technologies Inc - ADR’s price-to-sales ratio at 1.04 compared to the industry median at 3.44, this company has a lower price relative to revenue compared to its peers. This could make Himax Technologies Inc - ADR’s stock more attractive for value investors.

Himax Technologies Inc - ADR’s price-earnings ratio is 12.35 compared to the industry median at 27.57. This means it has a lower share price relative to earnings compared to its peers. This could make Himax Technologies Inc - ADR more attractive for value investors.

Now, let’s assess Himax Technologies Inc - ADR’s EV/EBITDA ratio, also known as enterprise multiple. At 18.6, when compared to the industry median of 18.9, 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. Himax Technologies Inc - ADR’s shareholder yield is higher than its industry median ratio of (0.86%). 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. Himax Technologies Inc - ADR’s price-to-book ratio is lower than its industry median ratio of 2.50. This could make Himax Technologies Inc - ADR more attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Himax Technologies Inc - ADR’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Himax Technologies Inc - ADR’s price-to-free-cash-flow ratio is lower than its industry median ratio of 37.00. This could make Himax Technologies Inc - ADR more attractive because the lower P/FCF ratio indicates that Himax Technologies Inc - ADR 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.

Magnachip Semiconductor Corp’s Value Grade

Value Grade:

MagnaChip Semiconductor Corp is a Luxembourg-based designer and manufacturer of analog and mixed-signal semiconductor platform solutions for communications, Internet of Things (IoT) applications, consumer, industrial and automotive applications. It has a segment Standard Products Group. Standard Products Group includes Display Solutions and Power Solutions. Display Solutions products provide panel display solutions to major suppliers of large and small rigid and flexible panel displays, mobile, automotive applications and home appliances. Power Solutions products include discrete and integrated circuit solutions for power management in communications, consumer and industrial applications.

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.

Magnachip Semiconductor Corp has a Value Score of 97, which is considered to be undervalued.

Magnachip Semiconductor Corp’s price-to-book ratio is higher than its peers. This could make Magnachip Semiconductor Corp less attractive for value investors when compared to the industry median at 2.50.

You can read more about Magnachip Semiconductor Corp’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.

SCHMID Group NV’s Value Grade

Value Grade:

SCHMID Group NV, formerly Pegasus TopCo BV is a Germany-based company. The Company is engaged in developing customized equipment and process solutions for multiple industries including high-tech electronics, photovoltaics, glass and energy systems. It provides solutions for advanced packaging on panel level size, high-end printed circuit boards as well as Photovoltaics & Glass manufacturing and energy storage. In addition, the Company offers wet machining and vacuum treatment including automation and transport systems for the electronics industry. It uses wet process and automation for surface modifications and planarization as well as molded part etching. The Company supplies equipment for the total value chain of photovoltaics. The product range includes single equipment for wafer, cell and module production as well as production lines and complete factory solutions.

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.

SCHMID Group NV has a Value Score of 72, which is considered to be undervalued.

SCHMID Group NV’s price-to-book ratio is higher than its peers. This could make SCHMID Group NV less attractive for value investors when compared to the industry median at 2.50.

You can read more about SCHMID Group NV’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.

• Himax Technologies Inc - ADR stock has a Value Grade of B.
• Magnachip Semiconductor Corp stock has a Value Grade of A.
• SCHMID Group NV 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 Thursday, September 12
• 3 Undervalued Semiconductors Stocks for Wednesday, September 11
• Why Advanced Micro Devices, Inc.’s (AMD) Stock Is Up 4.91%
• Why Alpha and Omega Semiconductor Ltd’s (AOSL) Stock Is Up 5.46%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.