Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Bradesco (BBD) or United Overseas Bank Ltd. (UOVEY). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both Banco Bradesco and United Overseas Bank Ltd. have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one piece of the puzzle for value investors.
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.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BBD currently has a forward P/E ratio of 6.96, while UOVEY has a forward P/E of 11.43. We also note that BBD has a PEG ratio of 0.43. 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. UOVEY currently has a PEG ratio of 0.92.
Another notable valuation metric for BBD is its P/B ratio of 1.08. 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, UOVEY has a P/B of 1.28.
These metrics, and several others, help BBD earn a Value grade of A, while UOVEY has been given a Value grade of C.
Both BBD and UOVEY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BBD is the superior value option right now.
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Banco Bradesco SA (BBD): Free Stock Analysis Report
United Overseas Bank Ltd. (UOVEY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).