Investors interested in Banks - Foreign stocks are likely familiar with Banco Santander (SAN) and Toronto-Dominion Bank (TD). 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 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, Banco Santander is sporting a Zacks Rank of #1 (Strong Buy), while Toronto-Dominion Bank has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that SAN likely has seen a stronger improvement to its earnings outlook than TD has recently. But this is only part of the picture 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.
SAN currently has a forward P/E ratio of 9.64, while TD has a forward P/E of 13.78. We also note that SAN has a PEG ratio of 0.66. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. TD currently has a PEG ratio of 1.66.
Another notable valuation metric for SAN is its P/B ratio of 1.17. 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, TD has a P/B of 1.66.
These metrics, and several others, help SAN earn a Value grade of B, while TD has been given a Value grade of D.
SAN 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 SAN is likely the superior value option right now.
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Banco Santander, S.A. (SAN): Free Stock Analysis Report Toronto Dominion Bank (The) (TD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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