Investors interested in stocks from the Banks - Foreign sector have probably already heard of NatWest Group (NWG) and Banco Itau (ITUB). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both NatWest Group and Banco Itau are sporting a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is only part of the picture for value investors.
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.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
NWG currently has a forward P/E ratio of 8.87, while ITUB has a forward P/E of 9.34. We also note that NWG has a PEG ratio of 0.73. 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. ITUB currently has a PEG ratio of 1.05.
Another notable valuation metric for NWG is its P/B ratio of 1.11. 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, ITUB has a P/B of 1.98.
Based on these metrics and many more, NWG holds a Value grade of A, while ITUB has a Value grade of D.
Both NWG and ITUB are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that NWG is the superior value option right now.
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NatWest Group plc (NWG): Free Stock Analysis Report Itau Unibanco Holding S.A. (ITUB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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