ITUB or CM: Which Is the Better Value Stock Right Now?

Investors interested in Banks - Foreign stocks are likely familiar with Banco Itau (ITUB) and Canadian Imperial Bank (CM). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Banco Itau and Canadian Imperial Bank are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that ITUB has an improving earnings outlook. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

ITUB currently has a forward P/E ratio of 9.55, while CM has a forward P/E of 15.98. We also note that ITUB has a PEG ratio of 0.91. 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. CM currently has a PEG ratio of 1.27.

Another notable valuation metric for ITUB is its P/B ratio of 2.25. 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, CM has a P/B of 2.52.

These are just a few of the metrics contributing to ITUB's Value grade of B and CM's Value grade of D.

ITUB sticks out from CM in both our Zacks Rank and Style Scores models, so value investors will likely feel that ITUB is the better option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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