Investors interested in stocks from the Banks - Midwest sector have probably already heard of Associated Banc-Corp (ASB) and UMB Financial (UMBF). But which of these two companies is the best option for those looking for undervalued stocks? Let's 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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Associated Banc-Corp has a Zacks Rank of #2 (Buy), while UMB Financial has a Zacks Rank of #3 (Hold) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that ASB is likely seeing its earnings outlook improve to a greater extent. However, value investors will care about much more than just this.
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 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.
ASB currently has a forward P/E ratio of 10.31, while UMBF has a forward P/E of 11.15. We also note that ASB has a PEG ratio of 0.97. 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. UMBF currently has a PEG ratio of 1.44.
Another notable valuation metric for ASB is its P/B ratio of 0.95. 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, UMBF has a P/B of 1.24.
Based on these metrics and many more, ASB holds a Value grade of B, while UMBF has a Value grade of D.
ASB sticks out from UMBF in both our Zacks Rank and Style Scores models, so value investors will likely feel that ASB is the better option right now.
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Associated Banc-Corp (ASB): Free Stock Analysis Report UMB Financial Corporation (UMBF): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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