NMR vs. HOOD: Which Stock Is the Better Value Option?

Investors with an interest in Financial - Investment Bank stocks have likely encountered both Nomura Holdings (NMR) and Robinhood Markets, Inc. (HOOD). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

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.

Both Nomura Holdings and Robinhood Markets, Inc. have a Zacks Rank of #1 (Strong Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. However, value investors will care about much more than just this.

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 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.

NMR currently has a forward P/E ratio of 9.13, while HOOD has a forward P/E of 74.75. We also note that NMR has a PEG ratio of 3.41. 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. HOOD currently has a PEG ratio of 3.47.

Another notable valuation metric for NMR is its P/B ratio of 0.84. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, HOOD has a P/B of 14.47.

These metrics, and several others, help NMR earn a Value grade of A, while HOOD has been given a Value grade of F.

Both NMR and HOOD are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NMR is the superior value option right now.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

Zacks Investment Research