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

Investors with an interest in Banks - Foreign stocks have likely encountered both Shinhan Financial (SHG) and National Australia Bank Ltd. (NABZY). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, Shinhan Financial has a Zacks Rank of #1 (Strong Buy), while National Australia Bank Ltd. has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SHG likely has seen a stronger improvement to its earnings outlook than NABZY has recently. However, value investors will care about much more than just this.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.

SHG currently has a forward P/E ratio of 6.68, while NABZY has a forward P/E of 16.55. We also note that SHG has a PEG ratio of 0.54. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NABZY currently has a PEG ratio of 12.35.

Another notable valuation metric for SHG is its P/B ratio of 0.59. 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, NABZY has a P/B of 1.91.

These metrics, and several others, help SHG earn a Value grade of A, while NABZY has been given a Value grade of C.

SHG is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SHG is likely the superior value option right now.

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

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