Investors looking for stocks in the Banks - Northeast sector might want to consider either Citizens Financial Group (CFG) or Central Bancompany (CBC). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Citizens Financial Group and Central Bancompany are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that CFG has an improving earnings outlook. But this is only part of the picture 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
CFG currently has a forward P/E ratio of 13.35, while CBC has a forward P/E of 15.28. We also note that CFG has a PEG ratio of 0.55. 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. CBC currently has a PEG ratio of 1.72.
Another notable valuation metric for CFG is its P/B ratio of 1.22. 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, CBC has a P/B of 1.88.
These metrics, and several others, help CFG earn a Value grade of B, while CBC has been given a Value grade of F.
CFG 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 CFG is likely the superior value 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).