Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Do Brasil SA (BDORY) and Banco Macro (BMA). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Right now, Banco Do Brasil SA is sporting a Zacks Rank of #2 (Buy), while Banco Macro has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that BDORY is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
BDORY currently has a forward P/E ratio of 6.19, while BMA has a forward P/E of 17.66. We also note that BDORY has a PEG ratio of 0.34. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. BMA currently has a PEG ratio of 0.64.
Another notable valuation metric for BDORY is its P/B ratio of 0.81. 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, BMA has a P/B of 1.26.
These are just a few of the metrics contributing to BDORY's Value grade of A and BMA's Value grade of C.
BDORY sticks out from BMA in both our Zacks Rank and Style Scores models, so value investors will likely feel that BDORY is the better option right now.
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Banco Do Brasil SA (BDORY): Free Stock Analysis Report
Macro Bank Inc. (BMA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).