Investors interested in Banks - Foreign stocks are likely familiar with Banco Santander (SAN) and Bank of Nova Scotia (BNS). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
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 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 Santander and Bank of Nova Scotia are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that SAN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture 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 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.
SAN currently has a forward P/E ratio of 9.25, while BNS has a forward P/E of 11.45. We also note that SAN has a PEG ratio of 1.00. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BNS currently has a PEG ratio of 1.42.
Another notable valuation metric for SAN is its P/B ratio of 1.17. 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, BNS has a P/B of 1.31.
Based on these metrics and many more, SAN holds a Value grade of B, while BNS has a Value grade of C.
SAN 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 SAN is likely the superior value option right now.
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Banco Santander, S.A. (SAN): Free Stock Analysis Report Bank of Nova Scotia (The) (BNS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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