Investors looking for stocks in the Banks - Major Regional sector might want to consider either U.S. Bancorp (USB) or BNY (BNY). 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both U.S. Bancorp and BNY are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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.
USB currently has a forward P/E ratio of 12.32, while BNY has a forward P/E of 17.16. We also note that USB has a PEG ratio of 1.08. 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. BNY currently has a PEG ratio of 1.10.
Another notable valuation metric for USB is its P/B ratio of 1.64. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, BNY has a P/B of 2.63.
These are just a few of the metrics contributing to USB's Value grade of B and BNY's Value grade of F.
Both USB and BNY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that USB is the superior value option right now.
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U.S. Bancorp (USB): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).