Investors interested in Banks - Foreign stocks are likely familiar with Banco Bradesco (BBD) and Nu Holdings Ltd. (NU). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive 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.
Right now, Banco Bradesco is sporting a Zacks Rank of #2 (Buy), while Nu Holdings Ltd. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that BBD likely has seen a stronger improvement to its earnings outlook than NU 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.
BBD currently has a forward P/E ratio of 8.14, while NU has a forward P/E of 17.71. We also note that BBD has a PEG ratio of 0.50. 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. NU currently has a PEG ratio of 0.60.
Another notable valuation metric for BBD is its P/B ratio of 1.35. 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, NU has a P/B of 6.36.
Based on these metrics and many more, BBD holds a Value grade of B, while NU has a Value grade of C.
BBD stands above NU thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBD is the superior value option right now.
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Banco Bradesco SA (BBD): Free Stock Analysis Report
Nu Holdings Ltd. (NU): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).