Investors interested in Banks - Major Regional stocks are likely familiar with State Street Corporation (STT) and Northern Trust Corporation (NTRS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
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 Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
State Street Corporation has a Zacks Rank of #2 (Buy), while Northern Trust Corporation has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that STT has an improving earnings outlook. 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.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
STT currently has a forward P/E ratio of 11.43, while NTRS has a forward P/E of 14.84. We also note that STT has a PEG ratio of 1.23. 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. NTRS currently has a PEG ratio of 1.39.
Another notable valuation metric for STT is its P/B ratio of 1.34. 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, NTRS has a P/B of 2.02.
These metrics, and several others, help STT earn a Value grade of B, while NTRS has been given a Value grade of C.
STT has seen stronger estimate revision activity and sports more attractive valuation metrics than NTRS, so it seems like value investors will conclude that STT is the superior option right now.
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State Street Corporation (STT): Free Stock Analysis Report Northern Trust Corporation (NTRS): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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