Investors interested in stocks from the Banks - Major Regional sector have probably already heard of KeyCorp (KEY) and State Street Corporation (STT). 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.
KeyCorp and State Street Corporation are both sporting a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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.
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.
KEY currently has a forward P/E ratio of 12.68, while STT has a forward P/E of 13.68. We also note that KEY has a PEG ratio of 0.72. 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. STT currently has a PEG ratio of 0.92.
Another notable valuation metric for KEY is its P/B ratio of 1.42. 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, STT has a P/B of 1.93.
Based on these metrics and many more, KEY holds a Value grade of B, while STT has a Value grade of F.
Both KEY and STT are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KEY is the superior value option right now.
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KeyCorp (KEY): Free Stock Analysis Report
State Street Corporation (STT): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).