Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco Macro (BMA) and Banco Itau (ITUB). 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 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.
Banco Macro and Banco Itau are both sporting a Zacks Rank of #2 (Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. 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 Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
BMA currently has a forward P/E ratio of 6.88, while ITUB has a forward P/E of 8.63. We also note that BMA has a PEG ratio of 0.26. 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. ITUB currently has a PEG ratio of 0.98.
Another notable valuation metric for BMA is its P/B ratio of 1.05. 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, ITUB has a P/B of 1.89.
These are just a few of the metrics contributing to BMA's Value grade of A and ITUB's Value grade of C.
Both BMA and ITUB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BMA is the superior value option right now.
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Macro Bank Inc. (BMA): Free Stock Analysis Report Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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