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 presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, both First Horizon National and Cullen/Frost Bankers are holding a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. 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 12.90, while CFR has a forward P/E of 13.15. We also note that FHN has a PEG ratio of 0.92. 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. CFR currently has a PEG ratio of 3.01.
Another notable valuation metric for FHN is its P/B ratio of 1.35. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, CFR has a P/B of 1.92.
Based on these metrics and many more, FHN holds a Value grade of B, while CFR has 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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