BAP or BSAC: Which Is the Better Value Stock Right Now?

Investors interested in stocks from the Banks - Foreign sector have probably already heard of Credicorp (BAP) and Banco Santander-Chile (BSAC). But which of these two stocks presents investors with the better value opportunity right now? 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Credicorp and Banco Santander-Chile are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. This means that BAP's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

BAP currently has a forward P/E ratio of 10.82, while BSAC has a forward P/E of 11.14. We also note that BAP has a PEG ratio of 0.70. 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. BSAC currently has a PEG ratio of 1.00.

Another notable valuation metric for BAP is its P/B ratio of 2.14. 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, BSAC has a P/B of 2.48.

These are just a few of the metrics contributing to BAP's Value grade of B and BSAC's Value grade of C.

BAP is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that BAP is likely the superior value option right now.

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

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