Investors interested in Banks - Southwest stocks are likely familiar with First Horizon National (FHN) and Cullen/Frost Bankers (CFR). 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
First Horizon National and Cullen/Frost Bankers are both sporting a Zacks Rank of #2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their 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.
FHN currently has a forward P/E ratio of 11.80, while CFR has a forward P/E of 12.56. We also note that FHN has a PEG ratio of 0.84. 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 2.88.
Another notable valuation metric for FHN is its P/B ratio of 1.24. 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, CFR has a P/B of 1.83.
These metrics, and several others, help FHN earn a Value grade of B, while CFR has been given a Value grade of C.
Both FHN and CFR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that FHN is 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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