Investors looking for stocks in the Banks - Major Regional sector might want to consider either U.S. Bancorp (USB) or Northern Trust Corporation (NTRS). But which of these two companies is the best option for those looking for undervalued stocks? 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.
Currently, U.S. Bancorp has a Zacks Rank of #2 (Buy), while Northern Trust Corporation has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that USB has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
USB currently has a forward P/E ratio of 11.76, while NTRS has a forward P/E of 15.98. We also note that USB has a PEG ratio of 1.01. 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 1.49.
Another notable valuation metric for USB is its P/B ratio of 1.46. 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 2.17.
These are just a few of the metrics contributing to USB's Value grade of B and NTRS's Value grade of C.
USB has seen stronger estimate revision activity and sports more attractive valuation metrics than NTRS, so it seems like value investors will conclude that USB is the superior option right now.
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U.S. Bancorp (USB): 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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