Investors interested in Banks - Southwest stocks are likely familiar with Prosperity Bancshares (PB) and Cullen/Frost Bankers (CFR). 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.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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, Prosperity Bancshares has a Zacks Rank of #2 (Buy), while Cullen/Frost Bankers has a Zacks Rank of #3 (Hold). This means that PB's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one factor that value investors are interested in.
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.
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.
PB currently has a forward P/E ratio of 11.62, while CFR has a forward P/E of 15.60. We also note that PB has a PEG ratio of 0.82. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. CFR currently has a PEG ratio of 2.60.
Another notable valuation metric for PB is its P/B ratio of 0.91. 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, CFR has a P/B of 2.34.
These metrics, and several others, help PB earn a Value grade of B, while CFR has been given a Value grade of C.
PB is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that PB is likely the superior value option right now.
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Prosperity Bancshares, Inc. (PB): Free Stock Analysis Report
Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).