Investors looking for stocks in the Banks - Foreign sector might want to consider either Banco Santander (SAN) or National Australia Bank Ltd. (NABZY). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Currently, Banco Santander has a Zacks Rank of #2 (Buy), while National Australia Bank Ltd. has a Zacks Rank of #3 (Hold). 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 just one piece of the puzzle for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SAN currently has a forward P/E ratio of 7.72, while NABZY has a forward P/E of 14.41. We also note that SAN has a PEG ratio of 0.81. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NABZY currently has a PEG ratio of 7.67.
Another notable valuation metric for SAN is its P/B ratio of 0.93. 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 1.57.
Based on these metrics and many more, SAN holds a Value grade of A, while NABZY has a Value grade of D.
SAN has seen stronger estimate revision activity and sports more attractive valuation metrics than NABZY, so it seems like value investors will conclude that SAN is the superior option right now.
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Banco Santander, S.A. (SAN): Free Stock Analysis Report National Australia Bank Ltd. (NABZY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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