SHG vs. EBKDY: Which Stock Is the Better Value Option?

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 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Shinhan Financial has a Zacks Rank of #2 (Buy), while Erste Group Bank AG has a Zacks Rank of #3 (Hold). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SHG is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies 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 9.14, while EBKDY has a forward P/E of 11.95. We also note that SHG has a PEG ratio of 0.59. 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. EBKDY currently has a PEG ratio of 0.70.

Another notable valuation metric for SHG is its P/B ratio of 0.85. 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 1.4.

These are just a few of the metrics contributing to SHG's Value grade of A and EBKDY's Value grade of C.

SHG has seen stronger estimate revision activity and sports more attractive valuation metrics than EBKDY, so it seems like value investors will conclude that SHG is the superior option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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