BNS or RY: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Banks - Foreign sector might want to consider either Bank of Nova Scotia (BNS) or Royal Bank (RY). 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.

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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Bank of Nova Scotia and Royal Bank are both sporting a Zacks Rank of #2 (Buy) right now. 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 factor that value investors are interested in.

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 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.

BNS currently has a forward P/E ratio of 11.31, while RY has a forward P/E of 13.55. We also note that BNS has a PEG ratio of 1.41. 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. RY currently has a PEG ratio of 1.48.

Another notable valuation metric for BNS is its P/B ratio of 1.3. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, RY has a P/B of 2.13.

Based on these metrics and many more, BNS holds a Value grade of B, while RY has a Value grade of C.

Both BNS and RY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that BNS 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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