Investors interested in stocks from the Banks - Foreign sector have probably already heard of Deutsche Bank (DB) and HDFC Bank (HDB). 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Deutsche Bank has a Zacks Rank of #2 (Buy), while HDFC Bank has a Zacks Rank of #3 (Hold) right now. This means that DB's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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.
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.
DB currently has a forward P/E ratio of 9.45, while HDB has a forward P/E of 20.10. We also note that DB has a PEG ratio of 0.36. 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. HDB currently has a PEG ratio of 1.29.
Another notable valuation metric for DB is its P/B ratio of 0.82. 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, HDB has a P/B of 2.49.
Based on these metrics and many more, DB holds a Value grade of B, while HDB has a Value grade of D.
DB has seen stronger estimate revision activity and sports more attractive valuation metrics than HDB, so it seems like value investors will conclude that DB is the superior option right now.
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Deutsche Bank Aktiengesellschaft (DB): Free Stock Analysis Report HDFC Bank Limited (HDB): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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