Investors with an interest in Financial - Investment Bank stocks have likely encountered both The Charles Schwab Corporation (SCHW) and Interactive Brokers Group, Inc. (IBKR). 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.
Both The Charles Schwab Corporation and Interactive Brokers Group, Inc. have a Zacks Rank of #2 (Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. However, value investors will care about much more than just this.
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.
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.
SCHW currently has a forward P/E ratio of 14.38, while IBKR has a forward P/E of 35.44. We also note that SCHW has a PEG ratio of 0.83. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. IBKR currently has a PEG ratio of 2.41.
Another notable valuation metric for SCHW is its P/B ratio of 3.6. 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, IBKR has a P/B of 6.95.
These are just a few of the metrics contributing to SCHW's Value grade of B and IBKR's Value grade of C.
Both SCHW and IBKR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SCHW is the superior value option right now.
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The Charles Schwab Corporation (SCHW): Free Stock Analysis Report
Interactive Brokers Group, Inc. (IBKR): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).