Investors interested in Banks - Foreign stocks are likely familiar with Banco Bradesco (BBD) and HDFC Bank (HDB). 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, Banco Bradesco has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #4 (Sell). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BBD has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
BBD currently has a forward P/E ratio of 6.93, while HDB has a forward P/E of 23.74. We also note that BBD has a PEG ratio of 0.39. 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. HDB currently has a PEG ratio of 1.89.
Another notable valuation metric for BBD is its P/B ratio of 0.97. 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, HDB has a P/B of 2.91.
Based on these metrics and many more, BBD holds a Value grade of B, while HDB has a Value grade of D.
BBD stands above HDB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that BBD is the superior value option right now.
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Banco Bradesco SA (BBD): Free Stock Analysis Report HDFC Bank Limited (HDB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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