Investors looking for stocks in the Banks - Southwest sector might want to consider either First Horizon National (FHN) or Cullen/Frost Bankers (CFR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.
Right now, First Horizon National is sporting a Zacks Rank of #2 (Buy), while Cullen/Frost Bankers has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that FHN likely has seen a stronger improvement to its earnings outlook than CFR has recently. But this is just one piece of the puzzle for value investors.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
FHN currently has a forward P/E ratio of 12.65, while CFR has a forward P/E of 13.37. We also note that FHN has a PEG ratio of 1.05. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. CFR currently has a PEG ratio of 2.63.
Another notable valuation metric for FHN is its P/B ratio of 1.28. 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, CFR has a P/B of 2.
Based on these metrics and many more, FHN holds a Value grade of B, while CFR has a Value grade of C.
FHN stands above CFR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that FHN is the superior value option right now.
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First Horizon Corporation (FHN): Free Stock Analysis Report Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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