Investors interested in stocks from the Banks - Foreign sector have probably already heard of Banco De Chile (BCH) and Commonwealth Bank of Australia Sponsored ADR (CMWAY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Banco De Chile is sporting a Zacks Rank of #2 (Buy), while Commonwealth Bank of Australia Sponsored ADR has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that BCH has an improving earnings 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.
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.
BCH currently has a forward P/E ratio of 13.07, while CMWAY has a forward P/E of 28.01. We also note that BCH has a PEG ratio of 2.45. 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. CMWAY currently has a PEG ratio of 9.90.
Another notable valuation metric for BCH is its P/B ratio of 2.73. 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, CMWAY has a P/B of 3.71.
These metrics, and several others, help BCH earn a Value grade of B, while CMWAY has been given a Value grade of D.
BCH 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 BCH is likely the superior value option right now.
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Banco De Chile (BCH): Free Stock Analysis Report Commonwealth Bank of Australia Sponsored ADR (CMWAY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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