Investors looking for stocks in the Banks - Foreign sector might want to consider either Societe Generale Group (SCGLY) or HDFC Bank (HDB). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, Societe Generale Group has a Zacks Rank of #1 (Strong Buy), while HDFC Bank has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SCGLY is likely seeing its earnings outlook improve to a greater extent. But this is only part of the picture for value investors.
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.
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.
SCGLY currently has a forward P/E ratio of 6.05, while HDB has a forward P/E of 19.44. We also note that SCGLY has a PEG ratio of 0.22. 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. HDB currently has a PEG ratio of 2.95.
Another notable valuation metric for SCGLY is its P/B ratio of 0.34. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, HDB has a P/B of 2.64.
These metrics, and several others, help SCGLY earn a Value grade of A, while HDB has been given a Value grade of F.
SCGLY stands above HDB thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SCGLY is the superior value option right now.
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Societe Generale Group (SCGLY): Free Stock Analysis Report HDFC Bank Limited (HDB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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