Investors interested in Banks - Major Regional stocks are likely familiar with U.S. Bancorp (USB) and Northern Trust Corporation (NTRS). 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
U.S. Bancorp and Northern Trust Corporation are both sporting a Zacks Rank of #2 (Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture 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 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 11.61, while NTRS has a forward P/E of 16.36. We also note that USB has a PEG ratio of 1.06. 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. NTRS currently has a PEG ratio of 1.25.
Another notable valuation metric for USB is its P/B ratio of 1.54. 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, NTRS has a P/B of 2.67.
Based on these metrics and many more, USB holds a Value grade of B, while NTRS has a Value grade of D.
Both USB and NTRS 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
Northern Trust Corporation (NTRS): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).