Investors with an interest in Banks - Foreign stocks have likely encountered both Shinhan Financial (SHG) and Banco Itau (ITUB). 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.
Both Shinhan Financial and Banco Itau have a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SHG currently has a forward P/E ratio of 8.53, while ITUB has a forward P/E of 10.67. 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. ITUB currently has a PEG ratio of 1.02.
Another notable valuation metric for SHG is its P/B ratio of 0.78. 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, ITUB has a P/B of 2.68.
These metrics, and several others, help SHG earn a Value grade of B, while ITUB has been given a Value grade of C.
Both SHG and ITUB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that SHG is the superior value option right now.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Shinhan Financial Group Co Ltd (SHG): Free Stock Analysis Report
Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).