Investors interested in Banks - Northeast stocks are likely familiar with Citizens Financial Group (CFG) and Central Bancompany (CBC). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, Citizens Financial Group has a Zacks Rank of #2 (Buy), while Central Bancompany has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that CFG is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its 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.
CFG currently has a forward P/E ratio of 13.17, while CBC has a forward P/E of 16.70. We also note that CFG has a PEG ratio of 0.53. 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. CBC currently has a PEG ratio of 2.23.
Another notable valuation metric for CFG is its P/B ratio of 1.22. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CBC has a P/B of 1.98.
These metrics, and several others, help CFG earn a Value grade of B, while CBC has been given a Value grade of D.
CFG has seen stronger estimate revision activity and sports more attractive valuation metrics than CBC, so it seems like value investors will conclude that CFG is the superior option right now.
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Citizens Financial Group, Inc. (CFG): Free Stock Analysis Report
Central Bancompany (CBC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).