KB vs. SMFG: Which Stock Should Value Investors Buy Now?

Investors looking for stocks in the Banks - Foreign sector might want to consider either KB Financial (KB) or Sumitomo Mitsui (SMFG). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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 emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Currently, KB Financial has a Zacks Rank of #2 (Buy), while Sumitomo Mitsui has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that KB is likely seeing its earnings outlook improve to a greater extent. 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.

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.

KB currently has a forward P/E ratio of 7.12, while SMFG has a forward P/E of 12.04. We also note that KB has a PEG ratio of 0.60. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SMFG currently has a PEG ratio of 0.74.

Another notable valuation metric for KB is its P/B ratio of 0.7. 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, SMFG has a P/B of 1.07.

These metrics, and several others, help KB earn a Value grade of B, while SMFG has been given a Value grade of C.

KB sticks out from SMFG in both our Zacks Rank and Style Scores models, so value investors will likely feel that KB is the better option right now.

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

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