Investors interested in Banks - Foreign stocks are likely familiar with Shinhan Financial (SHG) and Erste Group Bank AG (EBKDY). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Shinhan Financial is sporting a Zacks Rank of #1 (Strong Buy), while Erste Group Bank AG has a Zacks Rank of #2 (Buy). This means that SHG's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst 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 highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SHG currently has a forward P/E ratio of 7.78, while EBKDY has a forward P/E of 11.23. We also note that SHG has a PEG ratio of 0.62. 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. EBKDY currently has a PEG ratio of 0.67.
Another notable valuation metric for SHG is its P/B ratio of 0.71. 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, EBKDY has a P/B of 1.23.
These are just a few of the metrics contributing to SHG's Value grade of A and EBKDY's Value grade of C.
SHG stands above EBKDY thanks to its solid earnings outlook, and based on these valuation figures, we also feel that SHG is the superior value option right now.
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Shinhan Financial Group Co Ltd (SHG): Free Stock Analysis Report Erste Group Bank AG (EBKDY): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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