Investors interested in stocks from the Banks - Foreign sector have probably already heard of Shinhan Financial (SHG) and Erste Group Bank AG (EBKDY). 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Shinhan Financial has a Zacks Rank of #1 (Strong Buy), while Erste Group Bank AG has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that SHG has an improving earnings outlook. But this is just one piece of the puzzle for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.
SHG currently has a forward P/E ratio of 8.60, while EBKDY has a forward P/E of 11.19. We also note that SHG has a PEG ratio of 0.55. 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. EBKDY currently has a PEG ratio of 0.65.
Another notable valuation metric for SHG is its P/B ratio of 0.79. 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, EBKDY has a P/B of 1.3.
Based on these metrics and many more, SHG holds a Value grade of B, while EBKDY has a Value grade of C.
SHG stands above EBKDY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SHG is the superior value option right now.
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Shinhan Financial Group Co Ltd (SHG): Free Stock Analysis Report
Erste Group Bank AG (EBKDY): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).