Investors with an interest in Banks - Southwest stocks have likely encountered both First Horizon National (FHN) and Cullen/Frost Bankers (CFR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
First Horizon National and Cullen/Frost Bankers are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that FHN's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
FHN currently has a forward P/E ratio of 11.18, while CFR has a forward P/E of 12.98. We also note that FHN has a PEG ratio of 0.83. 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 2.97.
Another notable valuation metric for FHN is its P/B ratio of 1.16. 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 1.94.
These are just a few of the metrics contributing to FHN's Value grade of B and CFR's Value grade of C.
FHN 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 FHN is likely 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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