Investors interested in Banks - Foreign stocks are likely familiar with Banco Itau (ITUB) and Canadian Imperial Bank (CM). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Banco Itau has a Zacks Rank of #2 (Buy), while Canadian Imperial Bank has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that ITUB likely has seen a stronger improvement to its earnings outlook than CM has recently. But this is only part of the picture for value investors.
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.
ITUB currently has a forward P/E ratio of 9.34, while CM has a forward P/E of 15.65. We also note that ITUB has a PEG ratio of 0.89. 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. CM currently has a PEG ratio of 1.25.
Another notable valuation metric for ITUB is its P/B ratio of 2.2. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, CM has a P/B of 2.47.
Based on these metrics and many more, ITUB holds a Value grade of B, while CM has a Value grade of D.
ITUB sticks out from CM in both our Zacks Rank and Style Scores models, so value investors will likely feel that ITUB is the better option right now.
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Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis Report
Canadian Imperial Bank of Commerce (CM): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).