Investors interested in stocks from the Banks - Southwest sector have probably already heard of First Horizon National (FHN) and Cullen/Frost Bankers (CFR). 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.
First Horizon National and Cullen/Frost Bankers are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that FHN has an improving earnings outlook. 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.
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.
FHN currently has a forward P/E ratio of 11.62, while CFR has a forward P/E of 12.63. We also note that FHN has a PEG ratio of 0.83. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. CFR currently has a PEG ratio of 2.89.
Another notable valuation metric for FHN is its P/B ratio of 1.21. 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, CFR has a P/B of 1.83.
These are just a few of the metrics contributing to FHN's Value grade of B and CFR's Value grade of C.
FHN 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 FHN is likely the superior value option right now.
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First Horizon Corporation (FHN): Free Stock Analysis Report Cullen/Frost Bankers, Inc. (CFR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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