Investors interested in Banks - Foreign stocks are likely familiar with Mizuho (MFG) and Toronto-Dominion Bank (TD). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Mizuho has a Zacks Rank of #2 (Buy), while Toronto-Dominion Bank has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that MFG likely has seen a stronger improvement to its earnings outlook than TD has recently. But this is only part of the picture 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.
MFG currently has a forward P/E ratio of 11.14, while TD has a forward P/E of 13.23. We also note that MFG has a PEG ratio of 0.81. 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. TD currently has a PEG ratio of 1.67.
Another notable valuation metric for MFG is its P/B ratio of 1.13. 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, TD has a P/B of 1.6.
These metrics, and several others, help MFG earn a Value grade of B, while TD has been given a Value grade of F.
MFG has seen stronger estimate revision activity and sports more attractive valuation metrics than TD, so it seems like value investors will conclude that MFG is the superior option right now.
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Mizuho Financial Group, Inc. (MFG): Free Stock Analysis Report Toronto Dominion Bank (The) (TD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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