SHG or NABZY: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Shinhan Financial (SHG) and National Australia Bank Ltd. (NABZY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Shinhan Financial has a Zacks Rank of #1 (Strong Buy), while National Australia Bank Ltd. has a Zacks Rank of #2 (Buy). This means that SHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. 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.

SHG currently has a forward P/E ratio of 6.64, while NABZY has a forward P/E of 16.83. We also note that SHG has a PEG ratio of 0.54. 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. NABZY currently has a PEG ratio of 9.90.

Another notable valuation metric for SHG is its P/B ratio of 0.6. 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, NABZY has a P/B of 1.96.

These are just a few of the metrics contributing to SHG's Value grade of A and NABZY's Value grade of D.

SHG has seen stronger estimate revision activity and sports more attractive valuation metrics than NABZY, so it seems like value investors will conclude that SHG is the superior option right now.

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

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