Investors interested in stocks from the Financial - Investment Bank sector have probably already heard of The Charles Schwab Corporation (SCHW) and MarketAxess (MKTX). But which of these two stocks presents investors with the better value opportunity right now? Let's 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, The Charles Schwab Corporation has a Zacks Rank of #2 (Buy), while MarketAxess has a Zacks Rank of #3 (Hold). This means that SCHW's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its 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.
SCHW currently has a forward P/E ratio of 15.06, while MKTX has a forward P/E of 17.56. We also note that SCHW has a PEG ratio of 0.64. 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. MKTX currently has a PEG ratio of 2.72.
Another notable valuation metric for SCHW is its P/B ratio of 3.76. 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, MKTX has a P/B of 4.19.
Based on these metrics and many more, SCHW holds a Value grade of B, while MKTX has a Value grade of D.
SCHW sticks out from MKTX in both our Zacks Rank and Style Scores models, so value investors will likely feel that SCHW is the better option right now.
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The Charles Schwab Corporation (SCHW): Free Stock Analysis Report
MarketAxess Holdings Inc. (MKTX): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).