CIB or ITUB: Which Is the Better Value Stock Right Now?

Investors interested in Banks - Foreign stocks are likely familiar with Bancolombia (CIB) and Banco Itau (ITUB). But which of these two stocks presents investors with the better value opportunity right now? 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.

Bancolombia and Banco Itau are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CIB'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 tend to look at a number of traditional, tried-and-true figures to help them find stocks 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.

CIB currently has a forward P/E ratio of 7.29, while ITUB has a forward P/E of 9.33. We also note that CIB has a PEG ratio of 1.03. 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. ITUB currently has a PEG ratio of 1.06.

Another notable valuation metric for CIB is its P/B ratio of 1.43. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, ITUB has a P/B of 1.95.

These metrics, and several others, help CIB earn a Value grade of B, while ITUB has been given a Value grade of D.

CIB stands above ITUB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that CIB 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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