Investors with an interest in Banks - Foreign stocks have likely encountered both The Bank of East Asia Ltd. (BKEAY) and HDFC Bank (HDB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
The Bank of East Asia Ltd. and HDFC Bank are sporting Zacks Ranks of #2 (Buy) and #4 (Sell), respectively, right now. Investors should feel comfortable knowing that BKEAY likely has seen a stronger improvement to its earnings outlook than HDB has recently. But this is just one factor that value investors are interested in.
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.
BKEAY currently has a forward P/E ratio of 9.55, while HDB has a forward P/E of 14.00. We also note that BKEAY has a PEG ratio of 0.30. 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. HDB currently has a PEG ratio of 1.10.
Another notable valuation metric for BKEAY is its P/B ratio of 0.41. 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, HDB has a P/B of 1.8.
Based on these metrics and many more, BKEAY holds a Value grade of B, while HDB has a Value grade of D.
BKEAY stands above HDB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BKEAY is the superior value option right now.
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The Bank of East Asia Ltd. (BKEAY): Free Stock Analysis Report
HDFC Bank Limited (HDB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).