Investors with an interest in Banks - Foreign stocks have likely encountered both Shinhan Financial (SHG) and Erste Group Bank AG (EBKDY). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight 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. Investors should feel comfortable knowing that SHG likely has seen a stronger improvement to its earnings outlook than EBKDY has recently. But this is just one factor that value investors are interested in.
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 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 8.51, while EBKDY has a forward P/E of 10.41. We also note that SHG has a PEG ratio of 0.55. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. EBKDY currently has a PEG ratio of 0.61.
Another notable valuation metric for SHG is its P/B ratio of 0.82. 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, EBKDY has a P/B of 0.98.
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).