Investors interested in stocks from the Banks - Foreign sector have probably already heard of NatWest Group (NWG) and Nordea Bank AB (NRDBY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Right now, both NatWest Group and Nordea Bank AB are sporting a Zacks Rank of #2 (Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings 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 Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
NWG currently has a forward P/E ratio of 8.96, while NRDBY has a forward P/E of 10.07. We also note that NWG has a PEG ratio of 0.82. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NRDBY currently has a PEG ratio of 3.26.
Another notable valuation metric for NWG is its P/B ratio of 1.04. 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, NRDBY has a P/B of 1.64.
These metrics, and several others, help NWG earn a Value grade of B, while NRDBY has been given a Value grade of D.
Both NWG and NRDBY are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NWG is the superior value option right now.
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NatWest Group plc (NWG): Free Stock Analysis Report Nordea Bank AB (NRDBY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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