Investors interested in Banks - Foreign stocks are likely familiar with Banco Macro (BMA) and National Australia Bank Ltd. (NABZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Currently, Banco Macro has a Zacks Rank of #1 (Strong Buy), while National Australia Bank Ltd. has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that BMA likely has seen a stronger improvement to its earnings outlook than NABZY has recently. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
BMA currently has a forward P/E ratio of 16.35, while NABZY has a forward P/E of 17.14. We also note that BMA has a PEG ratio of 0.54. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NABZY currently has a PEG ratio of 5.10.
Another notable valuation metric for BMA is its P/B ratio of 1.3. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NABZY has a P/B of 1.89.
These metrics, and several others, help BMA earn a Value grade of B, while NABZY has been given a Value grade of D.
BMA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BMA is likely the superior value option right now.
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Macro Bank Inc. (BMA): Free Stock Analysis Report
National Australia Bank Ltd. (NABZY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).