Investors with an interest in Banks - Major Regional stocks have likely encountered both KeyCorp (KEY) and State Street Corporation (STT). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
KeyCorp and State Street Corporation are both sporting 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. However, value investors will care about much more than just this.
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.
KEY currently has a forward P/E ratio of 11.92, while STT has a forward P/E of 13.11. We also note that KEY has a PEG ratio of 0.69. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. STT currently has a PEG ratio of 0.88.
Another notable valuation metric for KEY is its P/B ratio of 1.34. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, STT has a P/B of 1.85.
These metrics, and several others, help KEY earn a Value grade of B, while STT has been given a Value grade of D.
Both KEY and STT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KEY is the superior value option right now.
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KeyCorp (KEY): Free Stock Analysis Report
State Street Corporation (STT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).