SMFG vs. CM: Which Stock Is the Better Value Option?

Investors interested in Banks - Foreign stocks are likely familiar with Sumitomo Mitsui (SMFG) and Canadian Imperial Bank (CM). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Sumitomo Mitsui and Canadian Imperial Bank are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that SMFG is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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 grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

SMFG currently has a forward P/E ratio of 10.97, while CM has a forward P/E of 12.97. We also note that SMFG has a PEG ratio of 0.79. 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. CM currently has a PEG ratio of 1.68.

Another notable valuation metric for SMFG is its P/B ratio of 1.05. 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, CM has a P/B of 1.9.

Based on these metrics and many more, SMFG holds a Value grade of B, while CM has a Value grade of C.

SMFG 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 SMFG is likely the superior value option right now.

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This article originally published on Zacks Investment Research (zacks.com).

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