BSBR or EBKDY: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Santander-Brazil (BSBR) or Erste Group Bank AG (EBKDY). 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 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.

Currently, both Banco Santander-Brazil and Erste Group Bank AG are holding a Zacks Rank of #2 (Buy). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is just one piece of the puzzle for value investors.

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.

BSBR currently has a forward P/E ratio of 6.71, while EBKDY has a forward P/E of 10.71. We also note that BSBR has a PEG ratio of 0.61. 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. EBKDY currently has a PEG ratio of 0.90.

Another notable valuation metric for BSBR is its P/B ratio of 0.87. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, EBKDY has a P/B of 1.16.

These are just a few of the metrics contributing to BSBR's Value grade of B and EBKDY's Value grade of D.

Both BSBR and EBKDY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BSBR is the superior value option right now.

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

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